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SYSTEM  BUILDING 

AND 
CONSTRUCTIVE   ACCOUNTING 


^e  Qraw-Ml  Book  (a  Tn& 

PUBLISHERS     OF     BOOKS     F  O  R^ 

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SYSTEM    BUILDING 

AND 

CONSTRUCTIVE    ACCOUNTING 


BY 

RAYMOND  D.   WILLARD,  B.C.S. 

C.  P.  A.  MASSACHUSETTS 

ASSOCIATE  AMERICAN  INSTITUTE  OF  ACCOUNTANTS.    FELLOW  CERTIFIED 

PUBLIC  ACCOUNTANTS   OF   MASSACHUSETTS,   INCORPORATED. 

MEMBER  NATIONAL  ASSOCIATION  OF  COST  ACCOUNTANTS. 

LECTURER  ON  SYSTEM  BUILDING  NORTHEASTERN 

COLLEGE.     MEMBER  OF  THE  FIRM  OF  ROBERT 

DOUGLAS  &  COMPANY,  CERTIFIED  PUBLIC 

ACCOUNTANTS. 


FIRST  EDITION 
SECOND  IMPRESSION 


079 


Ll  I  U  4 

McGRAW-HILL  BOOK  COMPANY,  INC. 
NEW  YORK:  370  SEVENTH  AVENUE 

LONDON  :  6  &  8  BOTJVERIE  ST.,  E.  C.  4 
1922 


COPYRIGHT,  1922,  BY  THE 
MCGRAW-HILL  BOOK  COMPANY,  INC. 


Bus.  Admin. 
Library 


«F 


PREFACE 

ff)      This  book  is  a  treatment  of  the  subject  of  system  building 
"1  and   constructive   accounting,    arranged   in    regular   gradations 
\from  the  fundamental  principles   of  system  work  to   the  ad- 
vanced problems  of  design  and  installation. 

The  wide  range  of  topics  necessary  to  be  considered  in  teach- 

ing such  a  course  makes  extremely  difficult  the  selection  of  read- 

Q  ing  assignments  for  the  student  from  the  publications  now  avail- 

^  able.     The  author  therefore  has  endeavored  to  prepare  a  volume 

intended  to  illustrate,  by  analysis  of  systems  now  in  use,  some 

of  the  problems  involved  in  system  work  so  arranged  that  a  pro- 

gressive course  of  study  may  be  followed. 

The  systems  and  subject  matter  in  this  volume  are  used  by 

the  author  in  teaching  the  course  in  system  building  at  North- 

^   eastern  College  School  of  Commerce  and  Finance,  and  are  an 

"x   arrangement  of  data  accumulated  during  the  several  years  which 

-3  the  college  has  offered  the  course. 

The  data  have  been  supplemented  by  new  charts  and  forms  so 
^   that  a  logical,  progressive  study  of  the  subject  can  be  made. 

While  the  volume  is  intended  primarily  as  a  text  book  for 

'    courses  in  system  building,  its  usefulness  is  not  necessarily  lim- 

ited to  the  student,  and  it  is  hoped  that  the  experienced  practi- 

tioner will  find  helpful  suggestions  and  the  basis  for  the  dis- 

cussion of  various  system  problems. 

Systems  dealing  with  analyzed  costs  and  burden  distribution 
are  only  briefly  touched  upon  in  the  closing  chapters,  as  cost  ac- 
counting furnishes  a  subject  so  far  in  advance  of  the  first  prin- 
ciples of  system  work  that  the  entire  subject  cannot  be  consid- 
ered in  a  single  volume. 

R.   D.   WlLLARD. 


CONTENTS 

PAOB 

INTRODUCTION v 

CHAPTER 

I.     GENERAL  DISCUSSION 1 

Importance  of  System  Work  in  Connection  with  Busi- 
ness Activities.     Result  of  Too  Much  System. 

II.     PROBLEMS  IN  DESIGNING 3 

The  Various  Steps  Incident  to  Designing  and  Installa- 
tion.    Plan  of  Operation.     Results  Desired. 

III.  PRELIMINARY  INVESTIGATION  AND  STUDY 6 

Detail    of    and    Programs    to    be    Followed    in    Pre- 
liminary Investigation. 

IV.  REPORTS 12 

Importance   of    Reports    and    General    Outline    to    be 
Used  in  Preparation. 

V.     COMMERCIAL  PAPERS  AND  PAPER  MAKING       .        .       .        .14 
Classification  and  Sizes.     Suggestions  for  Selection  of 
Paper  for  Different  Uses. 

VI.     RULING  AND  PRINTING 24 

Instructions   for  Preparation   of   Forms  and   General 
Rules  for  Submitting  Copy  to  Printer. 

VII.     PACKFORD  AUTO  SALES  COMPANY 28 

General  System  and  Plan. 

VIII.     PACKFORD  AUTO  SALES  COMPANY   (Continued)      ...       32 
Forms. 

IX.     PACKFORD  AUTO  SALES  COMPANY   ( Continued )      ...       88 
Assets  and  Liabilities.    Preparation  of  Balance  Sheets. 

X.     PACKFORD  AUTO  SALES  COMPANY   (Continued)      ...       97 
Income    Accounts.      Preparation    of    Profit    and    Loss 
Statements. 

XI.     PACKFORD  AUTO  SALES  COMPANY   (Concluded)      ...       99 
Expense  Accounts.      Preparation   of    Profit   and   Loss 
Statements. 

XII.     CENTRAL  GROCERY  COMPANY 107 

General  Discussion.     Personnel  and  Method  of  Opera- 
tion. 

XIII.     CENTRAL  GROCERY  COMPANY    (Continued)       ....     109 
Forms. 

vii 


via 

C'HAPTPR 

XIV. 


XV. 

XVI. 

XVII. 

XVIII. 

XIX. 

XX. 

XXI. 

XXII. 
XXIII. 

XXIV. 
XXV. 

XXVI. 

XXVII. 

XXVIII. 

XXIX. 

XXX. 

XXXI. 

XXXII. 


CONTENTS 

CENTRAL  GROCERY  COMPANY  (Continued)  .... 
Assets  and  Liabilities. 

CENTRAL  GROCERY  COMPANY  (Continued)  .... 
Income  Accounts.  Preparing  the  Statement  of  Revenue 
and  Expenses. 

CENTRAL  GROCERY  CO-MPANY  (Concluded)  .... 
Commercial  Expense  Accounts  and  Closing  Entries. 

THE  BOYLSTON  CLUB 

General  Discussion. 

THE  BOYLSTON  CLUB  (Continued) 

Forms. 

THE  BOYLSTON  CLUB   ( Continued ) 

Assets  and  Liabilities.     Preparation  of  Balance  Sheet. 

THE  BOYLSTON  CLUB   (Continued) 

Income   Accounts.      Preparation   of    Operating   State- 
ments. 

THE  BOYLSTON  CLUB   (Concluded) 

Expense  Accounts.     Preparation  of   Operating  State- 
ments. 

CENTRAL  LEATHER  COMPANY 

General  Discussion. 

CENTRAL  LEATHER  COMPANY  (Continued)  .... 
General  Ledger  Accounts. 

INSTITUTIONAL  ACCOUNTING 

BAY  STATE  HOSPITAL 

General  Plan. 

BAY  STATE  HOSPITAL  (Continued) 

Forms. 


PAOE 
125 


138 

140 
148 
150 
189 
204 

206 

225 
236 

240 
242 

244 
250 


BAY  STATE  HOSPITAL  (Continued) 

Treasurer's  Ledger. 

BAY  STATE  HOSPITAL  (Continued) 258 

Superintendent's  Ledger.     Assets  and  Liabilities. 

BAY  STATE  HOSPITAL  (Continued) 261 

Operating  Accounts. 

BAY  STATE  HOSPITAL  (Continued) 267 

Adjusting  and  Closing  Entries. 

BAY  STATE  HOSPITAL  (Continued) 281 

Preparing  Reports. 

BAY  STATE  HOSPITAL  (Concluded) 284 

Annual  Reports. 

INDEX 297 


CHAPTER  I 

GENERAL  DISCUSSION 

There  is  probably  no  branch  of  accounting  work  which  fur- 
nishes a  broader  field  for  the  exercise  of  constructive  ability  and 
business  analysis  than  that  of  designing  and  installing  account- 
ing systems  for  various  lines  of  business  activity. 

There  is  probably  no  branch  where  the  requirements  are  more 
exacting  in  order  that  the  efforts  of  the  systematizer  may  meet 
with  success.  Not  only  must  he  be  thoroughly  grounded  in  a 
knowledge  of  fundamental  accounting  principles  but  he  must 
have  a  thorough  understanding  of  the  various  intricacies  involved 
in  everyday  business  operations. 

A  system  properly  designed  will  furnish  the  executive  with  a 
chart  by  which  to  steer  his  business  course ;  if  improperly  designed 
it  will  be  merely  a  record  of  past  events,  in  which  case  it  shows 
only  the  financial  standing  of  the  business  as  of  a  given  date, 
frequently  so  long  after  the  events  have  transpired  as  to  be  of 
no  value  whatever.  The  usefulness  of  any  system  depends  solely 
upon  its  design  and  the  care  with  which  the  various  steps  have 
been  worked  out. 

The  fundamental  principles  of  system  building  as  applied  to 
various  classes  of  business  are  first  of  all  a  comprehensive  plan 
of  operation  for  securing  a  required  result  with  the  least  amount 
of  waste  in  energy,  time  and  money. 

The  successive  steps,  and  importance  of  each  section  or  depart- 
ment in  any  business  can  be  illustrated  in  two  examples,  viz.: 

A.  In  a  retail  or  wholesale  business  the  departments  are  usu- 
ally classified  under  five  headings : 

Purchasing  and  Receiving 

Selling 

Delivery 

Administration 

Financial. 

1 


2          SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

B.  In  manufacturing  another  element  becomes  essential,  that 
of  keeping  account  of  the  cost  of  converting  material  into  a  fin- 
ished product.  The  major  departments  would  be : 

Purchasing  and  Receiving 

Manufacturing 

Selling 

Delivery 

Administration 

Financial. 

With  these  elements  in  mind,  after  a  due  amount  of  review, 
any  other  business  variation  can  be  worked  out. 

Every  individual  case  is  bound  to  vary ;  there  are  no  two  con- 
ditions exactly  the  same.  Yet  in  some  situations  where  different 
concerns  are  in  identically  the  same  business  and  doing  approxi- 
mately the  same  volume  of  business  it  is  possible  to  use  the  same 
general  principles  in  a  system.  This  would  occur  in  such  groups 
as  retail  businesses,  insurance  brokers,  hotels,  and  in  lines  of 
manufacturing  where  an  allied  association  helped  to  secure  a 
uniform  method  of  accounting. 

The  successful  system  builder  must  decide  how  to  secure  re- 
sults in  the  most  direct  and  simple  manner.  Too  many  records 
or  an  excess  of  forms  can  complicate  matters  to  the  entire  confu- 
sion and  ultimate  ruin  of  a  system.  Theory  is  ideal,  but  actual 
practice  displays  what  is  best  needed. 

Frequently  a  business  is  loaded  with  a  system  entirely  too 
cumbersome  or  the  details  are  carried  to  such  a  fine  degree  that 
it  requires  too  much  expense  in  comparison  to  what  the  business 
can  stand  and  the  results  obtained.  In  cases  of  this  kind  much 
wealth  is  wasted  and  there  are  instances  on  record  where  a  cum- 
bersome, costly  system  has  actually  wrecked  the  business. 

Designing  a  system  for  an  entirely  new  concern  requires  con- 
siderable care  and  more  thought  than  working  upon  a  going 
business  where  records  are  available  and  the  situation  in  hand 
means  more  often  merely  revising  the  system  already  in  use. 


CHAPTER  II 

PROBLEMS  IN  DESIGNING 

The  work  of  designing  a  system  seems  to  fall  naturally  into  five 
distinct  steps,  each  of  which  is  important  and  each  of  which 
furnishes  a  study  in  itself. 

The  various  steps  incidental  to  the  designing  and  installing 
of  an  accounting  system  for  a  fairly  large  trading  or  manufac- 
turing concern  may  be  listed  as  follows : 

1.  The  preliminary  investigation. 

2.  The  study  of  the  problem  and  determination  of  methods  to  be  used 
to  obtain  desired  results. 

3.  The  drawing  up  of  a  list  of  accounts  to  be  used  together  with  the 
general  functions  of  each. 

4.  The  designing  and  ruling  of  the  forms  to  be  used  with  instructions 
for  printing,  ruling  and  binding. 

5.  The  drawing  up  of  a  report  and  set  of  instructions  for  the  conduct 
of  the  accounting  system  to  cover  the  following  points: 

a — A  list  of  the  ledger  accounts  to  be  used  with  the  functions  of 

each. 

b — Instructions  for  the  operation  of  the  accounting  system, 
c — Instructions  for  the  operation  of  the  mechanical  routine  of  the 

business. 
d — A  list  of  the  accessories  to  be  used. 

It  should  be  borne  in  mind  that  all  of  the  steps  listed  above 
are  not  necessarily  included  in  every  case  which  the  system 
builder  undertakes.  In  all  probability  all  of  these  points  will  be 
covered  only  in  cases  where  an  entire  system  is  to  be  installed  for 
a  new  business.  In  the  great  majority  of  cases  the  systematizer 
is  called  upon  to  make  over  and  improve  methods  already  in 
use.  Every  situation  needs  careful  review  and  a  consideration  of 
the  possible  developments  later  on.  The  following  guide  may  be 
taken  as  existing  principles  to  be  encountered  in  actuating  any 
system : 

The  plan,  idea  or  purpose 
Personnel  of  the  organization 
Forms  and  equipment 
Method  of  procedure 
The  details  of  routine 
Record  of  results. 
3 


4          SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

THE  PLAN,  IDEA  OR  PURPOSE 

System,  building  in  respect  to  the  various  kinds  of  businesses 
may  very  often  affect  only  some  division  or  department.  A  system 
may  be  planned  to  take  care  of  the  activities  and  results  of  a 
division  in  the  business  organization  for  handling  sales  only. 
Again  the  entire  purpose  of  a  system  might  involve  the  depart- 
ment of  bookkeeping  or  accounting.  In  other  situations  a  com- 
plete system  would  be  under  consideration  to  take  in  every 
activity  of  the  business  and  the  consequent  results.  No  matter 
what  the  situation  is  there  must  be  some  definite  plan  together 
with  some  particular  idea  and  a  fixed  purpose  for  accomplishment. 


PERSONNEL  OF  THE  ORGANIZATION 

The  directing  head  of  an  organization  naturally  must  be  en- 
tirely in  accord  with  whatever  plan  is  worked  out.  With  this 
directing  influence  equally  sincere  co-operation  must  radiate  on 
the  part  of  all  heads  of  departments  and  so  along  down  among 
their  subordinates  or  co-workers;  in  other  words,  it  requires 
team-work  to  insure  the  best  results.  Other  factors  are  necessary, 
such  as  the  capacity  to  understand  the  system  and  the  selection 
of  correct  intelligence  to  carry  it  into  execution.  There  are 
occasions  where  the  personnel  is  such  as  to  necessitate  having  and 
adopting  a  system  to  fit  the  people,  yet  more  often  entire  success 
is  secured  by  the  co-operation  of  all  heads  of  departments. 


FORMS  AND  EQUIPMENT 

The  stationery  consisting  of  blanks  in  various  designs  and 
shapes,  in  single  sheets  or  in  manifold  sets,  cards,  folders,  books, 
binders  and  equipment,  such  as  files,  machines  and  other  ap- 
paratus should  be  drafted  and  selected  with  the  idea  of  securing 
the  best  possible  arrangement  without  extravagance,  unnecessary 
waste,  and  always  with  the  idea  in  mind  to  secure  a  satisfactory 
result  in  the  most  direct  manner.  Forms  and  equipment  are 
always  necessary,  yet  there  is  always  some  danger  of  overloading 
the  system  with  too  many  forms  or  too  much  detail.  The  expense 
of  operation  according  to  the  situation  in  hand  should  always 
be  considered. 


PROBLEMS  I\  /)#,S7GA7/ATG  5 

METHOD  OF  PROCEDURE 

This  takes  into  consideration  the  manner  in  which  the  system 
should  be  handled ;  and  the  time  and  energy  properly  placed  so 
as  to  evenly  divide  the  day,  week  or  month  into  a  nicety  of 
accomplishment.  It  is  not  always  possible  to  actually  secure 
entire  co-operation  in  working  out  every  detail  of  a  system; 
nevertheless,  a  well-planned  system  will  usually  forestall  develop- 
ments of  that  kind.  Methods  also  embrace  proper  handling  of 
files,  machines  and  apparatus  such  as  apply  to  office  work. 

THE  DETAILS  OF  ROUTINE 

It  is  always  desirable,  and  should  be  adopted  as  standard 
practice,  to  establish  typewritten  instructions  as  to  the  use  and 
intended  course  to  be  followed  by  each  of  the  forms  affecting 
different  subjects  or  departments,  even  though  the  form  or  blank 
is  self-explanatory.  Routine  can  also  be  treated  by  charts  show- 
ing the  course  and  methods  of  handling  the  forms,  showing  where 
they  are  to  originate  and  the  source  of  information. 

RECORD  OF  RESULTS 

Recording  the  results  is  one  of  the  most  vital  parts  of  any 
system.  Whether  required  daily,  weekly,  monthly  or  for  any 
other  period  the  records  can  be  made  to  serve  the  same  purpose 
as  a  weather  vane.  Complete  information,  such  as  stock  on 
hand,  determining  the  sales  by  departments  or  sales  territory, 
keeping  account  of  advertising  expenditures  by  periods  or  to  date, 
the  volume  of  production  and  the  cost  of  operation,  meaning  not 
only  the  cost  of  manufacturing  but  also  the  cost  of  conducting 
various  departments,  comes  under  this  heading  of  records. 
Records  should  embrace  all  manner  of  valuable  information  so 
as  to  enable  the  managing  head  of  a  concern  to  properly  direct  or 
establish  new  policies.  One  of  the  most  valuable  records  or  record 
summaries  is  the  monthly  trial  balance,  which,  if  properly  de- 
signed, can  show  a  statement  of  condition,  detail  of  operations, 
comparisons  with  previous  periods  and  various  statistics  in  con- 
venient form  for  determination  of  future  activities. 

This  brings  forward  another  qualification  quite  essential  to 
the  successful  systematizer.  which  is  ability  to  forecast  the  future 
of  the  business  with  some  degree  of  accuracy  and  provide  for  its 
widening  field  of  endeavor. 


CHAPTER  III 

THE  PRELIMINARY  INVESTIGATION 
AND  STUDY 

It  is  of  course  obvious  that  before  the  systematizer  can  take 
even  the  first  steps  toward  outlining  the  system  to  be  used  in  any 
particular  case,  he  must  investigate  the  business  in  question  and 
as  far  as  possible  familiarize  himself  with  the  details  of  its  opera- 
tion. This  necessitates  frequent  visits  to  the  place  of  business 
of  the  client,  interviews,  and  in  the  case  of  large  businesses,  con- 
sultations with  the  heads  of  the  various  departments. 

If  possible,  before  the  system  builder  visits  the  client  for  the 
first  time  he  should  have  outlined  in  his  mind  a  fairly  definite 
plan  of  action.  By  so  doing  he  will  save  time  and  trouble  and 
will  make  a  more  favorable  impression  upon  the  various  persons 
with  whom  he  comes  in  contact. 

The  following  is  an  outline  of  points  which  might  be  covered  in 
the  preliminary  investigation  of  a  fairly  large  trading  concern  or 
institution  such  as  a  club,  hotel,  hospital  or  private  school.  It  is 
not  contemplated  that  all  the  points  outlined  would  necessarily 
have  to  be  covered  on  any  given  assignment.  The  detail  necessary 
would  depend  upon  the  size  of  the  business  and  the  nature  of 
the  work  to  be  performed. 

General. — 1.  Make  or  procure  a  plan  of  the  building  or 
buildings,  showing  the  location  of  the  various  departments. 

2.  The  system  builder  should  familiarize  himself  in  a  general 
way  with  the  commodities  handled,  how  they  are  purchased  or 
manufactured,  and  their  use  in  the  hands  of  consumers. 

3.  The  system  builder  should  obtain  a  list  of  the  ledger  ac- 
counts now  in  use,  and  have  a  clear  understanding  of  their 
functions. 

4.  Obtain  copies  of  the  forms  now  in  use  and  their  purpose. 

Purchases. — 1.  Is  there,  or  should  there  be,  a  separate  pur- 
chasing department?  If  not,  by  whom  and  how  are  purchases 
ordered  ? 

2.  How  are  the  needs  of  the  various  departments  made  known 
to  the  purchasing  department  ? 


THE  PRELIMINARY  INVESTIGATION  AND  STUDY  7 

3.  What   check   does  or  should   the   purchasing   department 
employ  to  prevent  double  orders? 

4.  Should  records  of  all  quotations  be  kept  on  file  and  how 
are  quotations  solicited? 

5.  What  form  of  purchase  order  is  to  be  used — how  numbered, 
how  many  copies?    What  is  done  with  the  various  copies? 

6.  What  record  of  goods  ordered  is  kept  in  the  purchasing 
department  ? 

7.  How  and   by   whom   are   incoming   goods   received — what 
records  of  goods  received  should  be  kept? 

8.  How  are  goods  received  checked  against  purchase  orders 
and  invoices? 

9.    How  are  goods  to  be  stored  ? 

10.  How    are    goods    to    be    requisitioned    by    the    various 
departments? 

11.  Is  express,  freight  and  carting  to  be  considered  a  part 
of  the  cost  of  goods  purchased  ? 

12.  What  method  of  recording  purchase  invoices  should  be 
used — are  individual  creditors'  accounts  to  be  kept? 

13.  What  method  of  paying  invoices  is  to  be  adopted  ? 

14.  Are  there  many  purchase  returns  and  allowances  ? 

15.  Are  salesmen  to  be  informed  as  to  the  cost  of  commodities? 
Receiving  and  Stock  Keeping. — 1.    How  and  by  whom  are 

incoming  goods  received,  what  records  of  goods  received  should 
be  kept  ? 

2.  How  are  goods  received  checked  against  purchase  orders? 

3.  How  should  invoices  be  checked  for  quantities,  prices,  ex- 
tensions, etc.  ? 

4.  How  are  goods  to  be  stored? 

5.  If  goods  are  to  be  kept  under  one  managing  head  what  form 
of  stock  ledger  should  be  used  ? 

6.  How    are    goods    to    be    requisitioned    by    the    various 
departments? 

7.  Are  salesmen  to  be  informed  as  to  the  cost  of  goods,  what 
form  of  cost  or  price  book  is  to  be  used  ? 

8.  Is  express,  freight  and  carting  to  be  considered  a  part  of 
the  cost  of  goods  purchased? 

9.  Are  there  many  purchase  returns,  if  so,  what  form  should 
be  used,  how  handled  on  the  stock  record? 


8          SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

10.  What  provision  is  made  for  recording  claims  against  the 
carrier  ? 

11.  How  often  is  a  physical  inventory  taken,  method  of  taking, 
how  priced  and  figured,  what  style  of  blank  best  suited  ? 

12.  Are  there  many  sales  returns  and  allowances  ? 
Inventories. — 1.    Should  a  going  inventory  be  kept — how  and 

by  whom — how  controlled  by  the  general  books — how  checked 
with  goods  actually  on  hand  ? 

2.  How  often  should  a  physical  inventory  be  taken — what 
method  of  costing  should  be  adopted  ? 

Sales.— 

1.  How  are  sales  to  be  classified? 

2.  What  is  the  organization  of  the  sales  department  ? 

3.  How  many  salesmen — how  distributed  as  to  territory — how 
selected  or  trained — how  paid? 

4.  What  records  should  be  kept  of  individual  salesmen's  sales, 
expenses,  etc.? 

5.  How  are  salesmen  to  be  kept  in  touch  with  changes  in 
prices  and  terms — new  commodities — new  customers? 

6.  How  and  by  whom  are  prices  and  terms  made  ? 

7.  How  are  orders  to  be  made  out — how  many  copies — what  is 
done  with  the  various  copies? 

8.  Are  orders  OK'd  for  credit  before  being  filled — by  whom? 

9.  What  is  the  routine  of  filling  orders — what  provision  is 
made  for  orders  received  for  goods  not  in  stock  ? 

10.  Organization  of  shipping  department — what  records  are 
kept — are  goods  rechecked  before  shipping? 

11.  What  method   of   billing  and   recording  sales   is   to  be 
adopted,  monthly  or  daily  bills — mechanical  method  of  billing — 
how  are  sales  recorded — how  are  postings  made  to  customers' 
accounts? 

Credit  Department. — 1.  Is  there  a  separate  credit  depart- 
ment? 

2.  How  are  delinquent  customers  followed  up  ? 

3.  Are  losses  on  account  of  bad  debts  heavy  or  not  ? 

4.  Is   the  concern   inclined   to   be   lenient   with   delinquent 
customers  ? 

Accounting  Department. — 1.  Personnel  of  accounting  de- 
partment. 


THE  PRELIMINARY  INVESTIGATION  AND  STUDY  Q 

2.  How  often  should  profits  be  arrived  at — how  often  should 
the  books  be  closed? 

3.  How  are  the  costs  of  sales  arrived  at — costing  each  sale — 
estimating  costs — physical  inventory  ? 

4.  What  internal  check  is  provided  for  cash   receipts   and 
disbursements  ? 

5.  Are  all  cash  receipts  to  be  deposited — how  break  the  finan- 
cial day  ? 

6.  Is  an  imprest  cash  fund  to  be  maintained — how  operated — 
amount  of  fund — how  often  replenished? 

7.  Who  has  authority  to  make  and  sign  checks? 

8.  What  subsidiary  records  are  to  be  kept — how  are  they  con- 
trolled on  the  general  books  ? 

9.    How  often  are  trial  balances  to  be  taken  ? 
10.    What  statistical  records  are  necessary — how  kept  ? 
Payroll. — 1.    What  method  of  paying  employees  is  in  use — 
monthly — weekly — daily — hourly — piecework — bonus  system  ? 

2.  How  are  the  payroll  records  written  up? 

3.  How    is  the   payroll    made    up — what   internal    check    is 
provided? 

4.  What  lists  of  employees  are  kept  and  by  whom? 
Administration. — 1.    What    administrative    departments    are 

there — principal  officers  and  their  duties? 

2.  Are  there  meetings  of  the  heads  of  departments — if  not, 
what  steps  are  taken  to  insure  co-operation  between  departments  ? 

3.  How  is  the  incoming  mail  handled — is  there  a  mail  clerk? 

4.  Who  has  charge  of  the  outgoing  mail — how  are  outgoing 
letters  copied  and  filed? 

5.  The  system  builder  should  obtain  a  list  of  the  names  of  the 
principal  employees  and  should  try  to  learn  something  of  the 
personality  of  each  one,  his  interest  or  lack  of  interest  in  the 
business,  his  methods  of  working,  his  readiness  to  respond  to 
suggestion,  his  judgment,  responsibility,  etc.    It  is  important  that 
the  system  builder  try  to  adapt  his  methods  to  the  personal 
peculiarities  of  those  with  whom  he  comes  in  contact,  in  order  that 
his  work  may  progress  smoothly,  pleasantly,  and  with  the  best 
possible  results. 

With  regard  to  the  above,  it  should  always  be  borne  in  mind 
that  in  every  individual  case  the  system  builder  must  adapt  his 
method  of  procedure  to  fit  the  needs  of  the  case  in  question.  One 


10        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

of  the  most  common  faults  of  the  average  systematizer  lies  in  th 
fact  that  he  lacks  perspective,  and  consequently  overloads  a 
business  with  a  system  altogether  too  big  and  cumbersome  to 
meet  its  needs.  Thousands  of  dollars  have  been  wasted  in  in- 
stalling systems  which  after  a  few  months  are  discarded  or 
changed  materially  because  they  prove  to  be  too  difficult  of  opera- 
tion for  the  business  for  which  they  were  designed.  "  Over- 
systematization  "  has  often  caused  the  profession  of  accounting 
to  fall  into  disrepute  among  business  men,  and  its  evils  can 
hardly  be  over-stated.  Make  your  system  fit  the  business  and 
not,  as  is  too  often  done,  the  business  fit  the  system. 

Having  completed  the  preliminary  examination,  before  step 
two  can  be  accomplished,  it  is  necessary  to  review  the  problem  as 
disclosed  by  that  investigation  in  order  to  determine  what  is 
required  and  what  is  necessary  to  accomplish  the  results  desired, 
before  starting  on  the  actual  work  of  design.  This  preliminary 
study  may  be  classed  under  seven  general  heads  or  questions. 

1.  How  often  is  it  necessary  to  close  the  books  in  order  to 
obtain  the  results  which  we  desire  and  how  much  detail  work  is 
added  if  we  make  actual  closings  at  shorter  intervals  than  is 
now  being  done  ? 

2.  How  shall  we  arrive  at  the  cost  of  goods  sold  ?    This  is  an 
important  point  inasmuch  as  the  profit  or  loss  for  the  period 
under  review  is  dependent  to  a  very  large   extent  upon  the 
accuracy  of  the  cost  charge  against  sales.     Should  the  cost  of 
sales  be  determined  by  physical  inventory  at  the  end  of  the 
period,  by  costing  each  sale  as  it  is  made  or  by  making  an  esti- 
mate of  cost  by  deducting  the  average  rate  of  profit  from  the 
amount  of  sales  ?    This  latter  method  is  rather  crude  in  its  opera- 
tion, unsatisfactory  in  its  results,  and  should  be  used  only  in 
exceptional  cases. 

3.  Is  petty  cash  to  be  employed,  if  so  what  amount  ?    Are  all 
cash  receipts  to  be  deposited?    What  record  of  deposits  should 
be  kept,  that  is,   pass  book  or  duplicate  deposit  slips?     The 
latter  method  is  most  advisable  and  whenever  it  is  possible  to  do 
so  all  cash  receipts  should  be  deposited  in  total. 

4.  What  distribution  of  purchases  and  expenses  is  to  be  made 
and  what  expense  accounts  are  necessary  in  the  general  records? 
What  forms  are  necessary  for  recording  distributions? 

5.  What  subsidiary  ledger  is  it  necessary  to  keep  ?    Without 


THE  PRELIMINARY  INVESTIGATION  AND  STUDY  11 

question  in  almost  every  business  of  medium  size  subsidiary 
ledgers  for  accounts  receivable  and  accounts  payable  are 
necessary. 

6.  On  or  about  what  day  of  the  month  is  the  trial  balance 
drawn  off?    What  time  of  the  month  are  the  statements  available 
and  what  executive  reports  can  be  made  from  the  trial  balance 
as  taken  from  books  at  the  present  time  ? 

7.  Consider  carefully  all  employees  who  are  to  have  anything 
to  do  with  the  system.     Measure  as  accurately  as  possible  each 
employee's  qualifications  and  limitations.     Visualize  the  work 
which  he  is  now  doing  and  determine  tentatively  where  he  will 
fit  into  the  general  scheme  under  the  system  which  you  propose 
to  submit. 


CHAPTER  IV 
REPORTS 

The  report  on  a  system  designed  as  the  result  of  a  preliminary 
investigation  is,  so  far  as  arrangement  is  concerned,  a  matter  of 
individual  taste.  There  are,  however,  several  important  features 
which  should  be  covered  in  order  that  the  executive  to  whom  it  is 
submitted  may  have  before  him  a  comprehensive  outline  of  the 
plan  to  be  followed. 

These  features  are : 

1.  A  more  or  less  detailed  outline  of  the  changes  which  are  to 
be  made,  the  reason  therefor,  and  the  results  to  be  obtained. 

2.  A  list  and  description  of  the  various  forms  to  be  used,  to- 
gether with  more  or  less  detailed  instructions  for  their  operation, 
the  amount  of  instructions  necessary  for  each  depending  upon 
the  importance  of  the  form  and  the  particular  purpose  for  which 
it  is  to  be  used. 

3.  A  list  of  the  general  ledger  accounts  properly  classified  and 
arranged  in  order,  so  that  by  the  preparation  of  a  monthly  trial 
balance  we  will  have  the  assets  and  liabilities  segregated  from 
the  income  and  expense  items  in  order  to  work  out  a  balance  sheet 
and  a  profit  and  loss  account. 

4.  A   set   of   instructions   for   the  operation   of   the   ledger 
accounts. 

5.  A  list  of  the  accessories  to  be  used. 

This  report  might  also  include,  or  be  accompanied  by,  a  chart 
of  organization  showing  the  personnel  in  all  departments  with 
the  duties  assigned  to  each. 

It  is  also  important  that  the  forms  which  have  been  designed 
for  use  in  connection  with  the  system  should  be  made  up  in 
proper  form  for  the  ruler  and  printer,  and  be  presented  with 
the  finished  report. 

It  will  be  seen  from  the  above  that  it  is  contemplated  that  the 
system  builder  having  made  his  investigation,  studied  the  prob- 
lem and  determined  upon  a  course  of  action,  proceeds  to  place 
his  ideas  on  paper  and  submit  them  for  approval,  or,  in  the  event 

12 


REPORTS  13 

that  he  is  to  go  ahead  with  the  installation,  to  have  his  plans  so 
worked  out  that  he  or  his  assistants  who  may  be  assigned  to  the 
work,  can  proceed  with  the  actual  installation  without  further 
discussion  or  study. 

In  order  to  visualize  different  system  problems  we  will  take 
specific  examples  and  discuss  the  features  peculiar  to  each  and  the 
desirability  of  making  use  of  the  different  principles  in  various 
situations.  We  will  first  take  a  fairly  elementary  set  of  accounts 
designed  to  include  all  of  the  necessary  forms  and  instructions 
for  a  medium-sized  business,  followed  by  other  sets,  each  illus- 
trating variations  or  elaborations  of  the  fundamental  principles. 

The  problems  will  be  arranged  in  progressive  order,  and  in  the 
final  chapters  we  will  have  established  a  groundwork  upon  which 
to  build  our  cost  accounting  systems,  and  a  more  advanced 
discussion  of  system  questions. 


CHAPTER  V 

COMMERCIAL  PAPERS 

In  preparing  the  forms  to  accompany  a  report  it  is  important 
that  the  paper  to  be  used  should  be  selected  with  care  and  with 
a  general  knowledge  of  the  purposes  to  which  the  different  kinds 
of  paper  are  adapted. 

PAPER  AND  PAPER  MAKING 

The  principal  kinds  of  paper  used  in  business  are  ledger,  bond, 
onion  skin,  book  paper,  cover  stock  and  manila.  It  is  desirable 
that  the  accountant  should  be  qualified  to  specify  the  kind,  quality 
and  weight  of  paper  when  drawing  up  forms  for  the  client. 

Commercial  papers  are  of  two  general  kinds,  ledger  and  bond, 
but  the  system  builder  should  also  familiarize  himself  with  the 
miscellaneous  papers  necessary  in  accounting  systems,  under 
which  head  are  included  onion  skin,  book  paper,  cover  stock 
and  manila. 

The  general  elements  entering  into  the  manufacture  of  paper 
are  rags  and  sulphite  or  wood  fiber.  Paper  made  entirely  of  rags 
is  the  best  and  has  the  longest  wearing  qualities. 

Paper  cuttings,  that  is,  trimmings  from  larger  sheets,  are 
turned  back  into  the  manufacture  of  paper  of  the  same  kind,  and 
if  the  original  paper  consisted  entirely  of  rags,  a  like  grade  is 
the  result  of  the  second  process  of  manufacture. 

Wood  fiber  is  made  of  spruce,  hemlock  and  poplar,  the  pulp 
being  treated  with  acid  which  furnishes  the  ready  identification 
as  to  the  substance  of  which  the  paper  is  made.  The  small  quan- 
tity of  acid  which  remains  in  the  wood  fiber  paper  causes  it  to 
turn  yellow  on  exposure,  colored  ink  to  fade  and  the  paper  to 
be  brittle. 

The  principal  difference  between  ledger  and  bond  paper  is 
that  the  fibers  in  bond  paper  are  longer  than  those  found  in 
ledger.  This  condition  is  regulated  in  the  process  of  manu- 
facture. The  length  of  fibers  also  has  a  bearing  on  the  surface 

14 


COMMERCIAL  PAPERS  15 

which  can  be  given  the  paper,  although  the  effect  of  long  or 
short  fibers  on  the  surface  is  very  slight.  If  the  pulp  is  allowed 
to  remain  in  the  beaters  during  the  process  of  manufacture  for  a 
long  time  short  fibers  in  the  paper  result  and  it  is  possible  to 
have  a  very  smooth  surface  if  the  paper  is  calendered  a  sufficient 
number  of  times.  The  paper  resulting  from  this  process  is  ledger 
paper  with  which  we  are  all  familiar  and  is  of  a  fair  tensil 
strength  with  a  smooth  glazed  surface. 

If  the  pulp  is  allowed  to  remain  in  the  beaters  for  a  short  time, 
the  fibers  are  longer  and  if  calendered  fewer  times  a  rougher  sur- 
face results,  giving  us  the  bond  paper,  generally  used  for 
letterheads. 

Ledger  and  bond  paper  represent  the  finer  grades  of  so-called 
writing  paper,  used  chiefly  for  recording  and  accounting  work. 
They  should  be  tough  and  durable  and  flexible  enough  to  crease 
repeatedly  without  cracking.  They  should  be  of  uniform  texture 
and  of  uniform  thickness  and  smoothness  on  both  sides  to  rule 
well  and  to  be  able  to  withstand  several  erasures  without  blot  or 
absorption  of  ink. 

When  uncolored  the  best  papers  are  of  a  bright  clean  whiteness 
which  will  not  fade,  diminish  in  tone,  or  grow  yellow  with  age. 
Linen  rag  is  the  only  basic  material  yet  found  which,  when 
properly  employed,  will  give  these  essential  qualities.  In  propor- 
tion to  the  diminution  of  the  linen  rag  fibers  will  come  a 
corresponding  decrease  in  one  or  more  of  these  important 
characteristics. 


SELECTION  OF  PAPER  FOR  SYSTEM  WORK 

The  general  uses  which  may  be  made  of  each  kind  of  paper  fall 
naturally  into  two  classes,  ledger  paper  being  for  books,  and  bond 
paper  for  letterheads,  billheads  and  small  forms.  In  selecting 
paper  for  loose-leaf  books,  a  slightly  heavier  grade  should  be 
used  than  that  necessary  for  bound  books  of  the  same  size. 

In  designing  forms  due  care  should  be  given  to  see  that  the 
size  of  the  form  can  be  cut  economically  from  a  standard  size 
sheet  turned  out  by  the  paper  manufacturers;  that  is  in  many 
cases  we  will  find  that  had  we  designed  a  form  slightly  larger  or 
smaller  we  could  have  cut  two  pages  from  one  sheet,  whereas,  the 


16        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

form  as  planned  necessitates  waste  when  cut  from  standard  size 
sheets. 

The  following  is  a  list  of  the  standard  sizes  and  weights  of 
ledger  and  bond  papers : 

SIZE  WEIGHTS  PER  REAM 

TBADE  NAME  OF  500  SHEETS 

Cap    14x17  14,   16,   18  &  20 

Double  Cap    14  x  34  32,  36  &  40 

17x28  20,  24,  28,  32,  36  &  40 

Double  Double  Cap   17  x  56  80 

28x34  64,  72  &  80 

Crown    15x19  20,  22  &  24 

Double  Crown    19  x  30  40,  44  &  48 

Demy 16  x  21  20,  22,  24,  26,  28  &  30 

Double  Demy 16  x  42  56  &  60 

21  x  32  48,  56  &  60 

Folio    17  x  22  16,  18,  20,  22,  24,  26,  28  &  30 

Double  Folio   . 22  x  34  32,  40,  48  &  56 

Medium     18  x  23  28,  32,  36,  38  &  40 

Double  Medium 18  x  46  72  &  80 

23x36  64,  72  &  80 

Royal    19  x  24  20,  24,  28,  32,  36,  40  &  44 

Double  Royal 19  x  48  88 

24x38  56  &  88 

Super  Royal    20  x  28  36  &  54 

Imperial    23  x  31  72 

Elephant 23  x  28  65 

Columbier     23  x  34  80 

When  specifying  paper  stock  for  the  printer  or  ruler  it  is 
necessary  to  state  the  desired  quality,  size  and  weight.  For 
example,  specifications  reading  "  Rule  and  print  like  copy  on 
ledger,  17x22-28  "  instructs  the  ruler  or  printer  to  use  ledger 
paper  cut  17  inches  by  22  inches,  and  weighing  28  pounds  to  the 
ream  of  500  sheets. 

The  Writing  Paper  Manufacturers  Association  has  recently 
adopted  a  method  of  specifying  commercial  papers  by  "sub- 
stance numbers."  A  table  has  been  issued  in  which  a  number 
is  given  to  each  of  the  standard  weights  and  sizes.  By  stating 
the  proper  substance  number  the  purchaser  clearly  indicates  the 
weight  desired. 

The  systematizer,  having  decided  on  the  quality  and  weight  of 
paper  stock  to  be  used  for  any  particular  form,  should  specify 
the  size  from  which  it  can  be  cut  most  economically.  It  is  neces- 
sary to  allow  from  %"  to  %"  on  each  side  of  a  form  for  cutting 
and  trimming,  more  for  smaller  forms  than  for  larger.  The  fol- 
lowing table  gives  the  sizes  of  standard  sheets  when  cut  into 
halves,  quarters  and  eighths: 


COMMERCIAL  PAPERS  17 

PAPER  HALF  SIZE  QUAKTER  SIZE  EIGHTH  SIZE 

14  x  17  Cap     8i/2  x  14  7x8%  4}£  x    7 

16x21  Demy     10%  x  16  8      x  10y2  5*4  x    8 

17  x  22  Folio     11      x  17  8%  x  1 1  5y2  x    8»/8 

18x23  Medium     Iiy2xl8  9      x  Ily2  5%  x    9 

19x24  Royal     12      x  19  9%  x!2  6      x    9'/> 

17x28  Double  Cap     ...  14      x  17  8y2xl4  7      x    8y2 

20x28  Super   Royal    ..  14      x  20  10      x  14  7      x  10 

21x32  Double  Demy   ..  16     x21  10y2  x  16  8      x 

22x34  Double  Folio    ..  17      x  22  11      x  17  8%xll 

23x31   Imperial     15>£x23  Hy2xl5J/2  7%xliy2 

23x36  Double  Medium.  Iiy2xl8  9      xlly2 

The  use  of  the  foregoing  table  is  illustrated  by  means  of  the 
following  simple  problem: 

A  concern  orders  12,000  copies  of  a  certain  form,  size  Sl/2  x  11. 
Allowing  one-eighth  of  an  inch  on  each  side  for  trimming,  from 
what  standard  size  can  this  order  be  cut  most  economically  ? 

The  printer  can,  of  course,  figure  out  for  himself  what  size 
stock  to  use  provided  he  is  given  information  as  to  the  quality 
and  weight  desired.  It  is  frequently  the  custom  to  specify,  say 
17  x  28  -  32,  not  intending  that  this  size  and  weight  must  of 
necessity  be  used,  but  that  these  figures  shall  serve  merely  as  a 
standard  or  comparative  basis.  Knowing  the  required  weight  the 
printer  can  easily  figure  out  what  size  he  can  use  most  economi- 
cally. For  example,  if  the  specifications  for  a  certain  form  call 
for  paper  14x17-14,  the  printer  may  find  that  he  can  cut  this 
form  with  the  least  possible  waste  from  sheets  17  x  28.  He  will 
use  17x28-32  which  is  double  14x17-16  in  size  and  weight, 
and  obviously,  of  the  same  comparative  weight. 

LEDGER  PAPERS 

The  difference  between  ledger  and  bond  paper  is  nowadays 
one  of  name  rather  than  of  quality.  Expert  paper  men  them- 
selves say  that  they  frequently  have  difficulty  in  distinguishing 
between  ledgers  and  bonds  of  the  same  quality  and  weight. 

Ledger  papers,  except  the  cheaper  grades,  come  in  three  colors : 
white,  buff  and  blue.  Ledger  papers  in  common  use  range  in 
comparative  weights  from  17x22-16  to  17x22-30;  17x22 
(Folio)  is  usually  specified  for  bound  and  loose-leaf  office  books 
and  forms,  and  14x17  (Cap)  for  billheads,  letterheads,  requi- 
sitions, checks,  etc. 

For  the  ordinary  office  books  and  forms  it  is  customary  to 
specify  17x22-26  or  28  for  bound  books  and  17x22-30  for 


18        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

loose  leaf  sheets.  On  the  narrower  forms,  say  10  inches  or  less, 
17x22-20  or  24  for  bound  books  and  17x22-24  or  26  for 
loose-leaf  may  be  used. 

For  ring  binders  in  which  permanent  forms  are  to  be  kept  a 
fairly  heavy,  good  quality  ledger  should  be  used,  say  17x22-22 
or  24.  The  lighter  weight  ledgers  are  sometimes  used  for  letter- 
heads, billheads,  etc.,  but  they  are  not  considered  as  satisfactory 
as  bonds  because  of  their  liability  to  crack  when  folded. 

Following  is  a  schedule  of  some  of  the  standard  makes  of 
ledgers : 

Whiting  (Whiting  Paper  Co.) 

Weston  Linen   (Byron  Weston  Co.) 

Scotch  Linen    (Parsons  Paper  Co.) 

Record   (Whiting) 

Defiance   (Byron  Weston) 

Defendum  ( Parsons ) 

Reliance  (American  Writing  Paper  Co.) 

Sterling  (Whiting) 

Title   (Whiting) 

The  higher  priced  papers  may  be  used  for  forms  where  great 
strength,  durability  and  erasing  qualities  are  desired,  also  for 
law  blanks,  public  records,  etc. 

The  cheaper  grades  have  less  strength  and  poorer  writing  sur- 
face than  the  corresponding  weights  in  the  higher  priced  papers. 
They  may  be  used  for  internal  forms  not  frequently  referred  to, 
cost  ledgers  for  small  manufacturing  concerns,  goods  received 
sheets,  delivery  sheets  and  other  records  where  considerable 
weight  is  required. 

BOND  PAPERS 

Bond  papers  are  known  as  unglazed,  glazed,  linen  or  laid,  ac- 
cording to  the  finish.  The  "unglazed"  or  "ledger"  finish  is 
obtained  by  running  the  paper  through  the  calenders  several 
times,  and  a  glazed  bond  is  practically  the  same  as  a  ledger  of 
the  same  weight. 

The  "laid"  and  "linen"  effects  are  obtained  by  submitting 
the  paper  to  very  heavy  pressure,  each  sheet  being  placed  between 
a  smooth  surface  and  a  piece  of  linen  cloth  woven  in  the  pattern 
which  it  is  desired  to  impress  upon  the  paper. 

Bonds  come  in  great  variety  of  colors,  differing  for  different 
makes  and  grades.  Bond  is  supplied  in  white,  blue,  russet, 
opaline,  green,  tan,  celestial,  olive,  pearl,  primrose,  buff,  orange, 


COMMERCIAL  PAPERS  19 

quaker  gray,  gray,  pink,  melon  and  cherry.  Besides  these  there 
are  lavender,  cream,  golden  rod,  canary,  azure,  etc.  Uniformity 
of  color  is  one  of  the  most  serious  of  the  paper  manufacturers' 
problems,  and  the  same  colors  vary  widely  in  different  makes. 

The  cheaper  grades  of  bonds  are  not  as  strong,  and  do  not 
have  the  enduring  qualities  of  the  better  grades;  neither  are 
they  uniform  in  color,  quality  or  thickness. 

Following  is  a  list  of  some  of  the  best  known  brands  of  bonds : 

Crane's  Safety  and  Parchment  Bond   (Crane  Co.) 

Parsons'  Bond  (Parsons) 

Imperial    (Whiting) 

Coupon   (American  Writing) 

Old  Hampden   (Parsons) 

Defiance  (Byron  Weston) 

Roman   (American  Writing) 

Titan   (American  Writing) 

Textile   (Whiting) 

Tokio   (Crocker  McElwain  Co.) 

Certificate  (Crocker  McElwain  Co.) 

Hammermill    (Hammermill  Paper  Co.) 

For  large  and  medium  sized  forms,  letter  and  billheads,  etc., 
it  is  customary  to  specify  17  x  22  -  20  or  14  x  17  -  14  or  16.  For 
smaller  forms,  17x22-16  may  also  be  used  when  it  is  desired 
to  take  from  1  to  5  carbon  copies. 

ONION  SKIN 

Onion  skin  is  simply  light  weight  bond.  It  comes  glazed  and 
imglazed  and  in  a  variety  of  colors  including  blue,  canary,  cherry, 
opaline,  pink,  green  and  golden  rod.  It  varies  in  weight  from 
17x22-8  to  17x22-10  and  17x22-liy2-  For  commercial 
purposes  the  cheaper  grades  (unglazed)  are  used. 

Onion  skin  is  frequently  used  as  the  third  or  third  and  fourth 
sheets  in  manifold  work,  the  first  two  sheets  being  17  x  22  - 16  or 
20.  It  should  always  be  used  in  cases  where  more  than  five 
copies  are  desired. 

MISCELLANEOUS 

Cover  Stock. — Cover  stock  comes  in  a  variety  of  colors  in- 
cluding blue  granite,  canary,  cherry,  dark  blue,  drab,  fawn,  gold, 
lilac,  melon,  moss  rose,  nile  green,  orange,  pearl,  robin's  egg  blue, 
rose,  buff,  scarlet,  tea  and  terra  cotta.  It  comes  in  the  following 
comparative  weights  and  sizes : 


20        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

20x25-22,  32,  48  &  60 
22x28-32,  48,  58  &  70 
25x38-40,  ?0  &  60 

As  in  the  case  of  ledgers  and  bonds,  it  is  usually  wrapped  500 
sheets  to  the  ream. 

Manila  Tag. — Manila  tag  stock  commonly  comes  in  the  fol- 
lowing weights  and  sizes: 

22Vox28i/2-100,  120,  140  &  160 

24      x36      -100,  120,  140,  150,  160,  175  &  200 

Index  Bristol. — Bristol  or  card  index  stock  commonly  comes 
in: 

20i/>  x24%-    70,  90  &  110 

22yox28%-    90,  100,  110,  120,  140,  &  180 

251/2  x  30y2 -110,  140,  170  &  220 

It  is  usually  wrapped  in  packages  of  100  sheets  each.  The 
standards  colors  are  white,  buff,  blue,  salmon,  cherry,  green 
and  canary.  For  ordinary  index  purposes  100,  110  or  120  pound 
stock  is  used. 

Paper  is  an  exceedingly  difficult  commodity  to  judge.  Paper 
experts  readily  admit  their  inability  to  judge  paper  without 
submitting  it  to  various  mechanical  tests.  No  mill  can  make  two 
lots  of  paper  exactly  the  same  in  thickness,  finish,  strength  or 
color.  Tensile  strength,  surface  finish,  uniformity  of  thickness 
and  color  are  the  major  factors  in  the  construction  of  blanks 
and  leaves  used  in  accounting  work.  Considerable  care  should  be 
exercised  in  the  selection  of  paper  to  be  used  in  the  more  im- 
portant records  of  original  entry,  such  as  cash  books,  voucher  or 
check  registers,  journals,  minute  records,  pay  rolls,  balance 
sheets,  profit  and  loss  statements,  and  also  in  books  of  record, 
such  as  ledgers,  stock  records,  inventory  records,  etc. 

Paper  as  above  stated  is  made  up  in  a  very  wide  range  of 
grades  and  weights  which  for  convenience  may  be  classified  into 
the  following  headings: 

Ledger  Paper — 3  weights   . .  Heavy 

Medium 
Light 

Bond  Paper — 4  weights  ....  Heavy 

Medium 
Light 
Extra  Light 


COMMERCIAL  PAPERS  21 

Manila  Paper — 4  weights ..  Heavy 
Medium 
Light  Medium 
Light 

Transparent  Paper   Light  weight 

Semi  Transparent  Tissue   . .  Extra  Light  weight 

Folder  Stock   >  _.       j  ht     Extra  Heavy 
or  Tag  Stock    }  leights  Heavy 

Medium 

Light 

Press  Board    )  Extra  Heavy 

Guides J  Heavy 

Medium 

Card  Stock — 4  weights   ....  Extra  Heavy 

Heavy 
Medium 
Light 

Carbon  Paper — by  grades  . .  Typewriter  Use 

Pen  &   Ink  Use 
Pencil  Use 

The  quality  of  paper  to  be  used  depends  upon  the  kind  of 
record  or  blank  and  its  importance  in  the  system  designed.  The 
greatest  test  any  paper  can  have  is  that  of  use.  Good  paper  is 
to  be  recommended,  either  ledger  or  bond,  in  making  all  forms 
or  books  where  the  record  is  kept  for  reference  indefinitely. 
Medium  quality  serves  the  purpose  in  many  instances  for  routine 
work,  while  the  cheaper  grade  of  paper  is  used  more  or  less  for 
the  gathering  of  temporary  data.  The  quality  sometimes  depends 
upon  the  client's  own  taste  or  selection. 


COLOR  OF  PAPER 

Under  this  heading  only  the  most  popular  colors  should  be  con- 
sidered, and  care  should  be  used  to  avoid  odd  tints  which  are 
not  only  hard  to  secure  in  some  localities,  but  hard  to  match  on 
reorders.  For  all  books  or  records  that  are  used  frequently  or 
continually  buff  color  is  easy  on  the  eyes  and  does  not  show  soil 
as  readily  as  white.  Selection  of  colors  may  be  made  from 
the  following: 

Ledger  paper,  buff,  white  and  blue. 

Bond  paper,  buff,  white,  lemon,  pink,  blue,  green,  yellow, 
canary,  russet  and  golden  rod. 

Manila   paper,  natural  or  white,  yellow  and  pink. 

Transparent  paper,  natural  or  white. 


22        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Semi  transparent  tissue,  white. 

Folder  stock,  natural  (similar  to  buff),  and  blue. 

Pressboard,  gray  and  brown. 

Guide  stock,  natural  (similar  to  buff),  buff,  blue  and  salmon. 

Card  stock,  buff,  white,  lemon,  cherry,  blue,  salmon  and  green. 

THICKNESS  OF  PAPER 

There  is  always  some  variation  in  the  finish  of  papers  made 
at  different  times  or  in  different  lots.  This  manufacturing  condi- 
tion results  in  a  similar  variation  in  the  number  of  sheets  the 
papers  will  stack  to  the  inch.  A  smooth,  hard  finished  paper  will 
always  measure  more  sheets  to  the  inch  than  a  medium  or  rough 
paper  of  the  same  weight.  Plain  sheets  will  stack  a  few  more 
sheets  to  the  inch  than  printed  sheets.  The  following  table  is 
therefore  approximate,  merely  to  assist  in  determining  various 
capacities  after  paper  has  been  printed : 


PAPER 
Ledger  Heavy  

APPROXIMATE  NUMBER  OF 
SHEETS  PER  INCH 
175 
215 
275 
275 
355 
440 
575 
275 
355 
500 
80 
100 
130 
200 
40 
55 
1000  cards       16V_>  inches 
1000       "          14 
1000       "          11 
1000       "            9V,       " 

Medium    

Light     

Bond  Heavy    

Medium     

Light    

Extra  Light   

Manila,    Heavy   

*'      Medium     

Transparent    

Folder  Stock  Extra  Heavy 
"      Heavy    .... 
"      Medium     .. 
"      Light     
Guides              Heavy     .... 
"                     Medium 
Cards               Extra  Heavy 
Heavy  .... 

Medium  .... 
Lieht  . 

CARBON  PAPER 

In  system  building  there  are  many  opportunities  for  planning 
and  using  manifold  sets  of  blanks.  In  selecting  or  recommending 
carbon  paper  for  manifold  work,  care  should  be  used  to  study  the 
situation  and  the  uses  to  which  the  carbon  is  put.  If  pen  and  ink 
is  to  be  used  not  only  is  a  carbon  suitable  for  pen  work  necessary, 
but  a  manifold  pen  point  or  manifold  fountain  pen  is  quite 


COMMERCIAL  PAPERS  23 

essential.  The  ordinary  soft  flexible  pen  will  not  secure  good  re- 
sults. The  same  idea  applies  to  pencil  work.  The  ordinary 
thick  pencil  carbon  such  as  used  in  duplicate  sales  books,  dupli- 
cate or  triplicate  bill  of  lading  forms,  etc.,  will  not  result  in 
good  clear  copies.  The  pen  or  pencil,  if  held  as  nearly  perpen- 
dicular as  possible,  will  secure  the  best  results. 

With  typewriter  manifold  work  a  light  weight  fine  quality 
carbon  with  a  hard  surface  will  secure  satisfactory  results.  In 
the  case  of  very  heavy  manifold  sets  the  platen  on  the  machine 
will  affect  the  clearness  of  copies;  hard  platens  secure  the  best 
results  where  more  than  four  copies  are  required. 

Heavy  Thick  Carbon. — This  grade  of  carbon  is  used  princi- 
pally with  duplicate  sales  books,  duplicate  bill  of  lading  forms, 
duplicate  city  delivery  blanks,  and  all  ordinary  duplicate  work 
where  low  grades  of  paper  are  used. 

Pen  Carbon. — This  is  a  medium  weight  carbon  of  good  quality 
with  sensitive  surface.  It  is  used  in  both  pen  and  pencil  work 
for  sets  of  blanks  made  in  duplicate,  triplicate  and  quadruplicate. 

Typewriter  Carbon. — There  are  several  different  makes  of 
good  typewriter  carbon  on  the  market ;  the  actual  quality  to 
be  used,  likewise  the  actual  weight  and  finish,  will  depend  upon 
the  number  of  copies  required.  With  heavy  carbon  work,  good 
results  depend  upon  the  selection  of  the  proper  weight,  thickness 
and  finish  of  the  paper  and  the  proper  weight  and  finish  of  the 
carbon  paper,  also  the  kind  of  platen  upon  the  machine. 


CHAPTER  VI 

RULING  AND  PRINTING 

Having  a  thorough  knowledge  of  our  paper  problems,  we  next 
consider  the  various  rulings.  Certain  fundamental  rules  govern 
the  preparation  of  forms  which  must  be  observed  in  order  to 
insure  success. 

The  number  and  design  of  forms  required  for  a  general  ac- 
counting system  is,  of  course,  influenced  by  the  accounts  which 
must  be  kept  in  order  to  record  the  facts  according  to  the  plan  we 
have  formulated.  The  preparation  of  forms  to  be  used  with 
accounting  systems  usually  involves  an  original  design  by  the 
accountant  in  charge,  and  in  order  to  have  at  least  a  working 
knowledge  of  how  to  accomplish  the  result,  it  is  necessary  that  we 
have  in  mind  a  few  rules  in  connection  therewith. 

Forms  are  usually  sketched  out  in  a  rough  pencil  copy,  so  that 
the  accountant  can  visualize  the  sheet  in  its  completed  state.  The 
actual  ruling  of  the  form  is  generally  done  by  one  of  his 
assistants. 

Headings  are  usually  printed  over  the  columns  and  certain 
spaces  are  necessary  to  accommodate  columns  of  figures,  the 
printed  headings,  etc. 

The  printing  trade  follows  what  is  known  as  the  American 
point  system,  one  point  representing  one  seventy-second  of  an 
inch.  The  following  list  gives  the  names  of  the  old  bodies  and 
their  designation  by  points. 

3y2  Point,  Brilliant 

4  '/.j       "       Diamond 

5  "       Pearl 
6V6       "       Agate 

6  Nonpareil 

7  "       Minion 

8  "       Brevier 

9  "       Bourgeois 

10  "       Long  Primer 

11  '       Small  Pica 

12  '       Pica 

14  '  2  line  Minion  or  English 

15  '  3  line  Pearl 

16  '  2  line  Brevier 
18  '  Great  Primer 

24 


RULING  AND  PRINTING 


25 


20 
22 
24 
28 
30 
33 
36 
40 
42 
44 
48 
54 
60 
72 


2  line  Long  Primer  or  Paragon 

2  line  Small  Pica 

2  line  Pica 

2  line  English 

5  line  Nonpareil 

4  line  Brevier 

2  line  Great  Primer 

Double  Paragon 

7  line  Nonpareil 

4  line  Small  Pica  or  Canon 

4  line  Pica 

9  line  Nonpareil 

5  line  Pica 

6  line  Pica 


The  approximate  number  of  words  in  a  square  inch  under  the 
point  system  is  shown  in  the  following  table : 


14  Point,  Solid 

11 

12 

u 

14 

12 

Leaded 

11 

10 

Solid 

21 

10 

Leaded 

16 

8 

Solid 

32 

8 

Leaded 

23 

6 

Solid 

47 

6 

Leaded 

34 

In  order  that  the  finished  form  may  be  pleasing  to  the  eye  it  is 
necessary  to  follow  a  more  or  less  general  color  scheme  in  ruling. 
The  combinations  most  generally  used  are  red  and  blue,  and 
brown  and  green,  the  former  being  used  almost  entirely  on  white 
paper,  while  the  latter  is  favored  by  some  when  used  on  buff. 
The  selection  of  color  is  more  or  less  optional  but  it  is  well  to 
make  the  selection  so  it  can  be  followed  throughout  the  system. 

A  form  is  usually  set  off  by  a  border  or  distinct  arrangement 
of  lines  around  the  body  of  the  sheet.  The  lines  generally  'used 


.-Blue 


Fig.  1 

for  borders  are  classed  as  follows:  Four  line  fancy  for  large 
forms,  three  line  fancy  for  medium  sized  forms,  and  double  red 
for  small  forms.  A  four  line  fancy  is  ruled  with  two  red  lines, 
about  1/16  of  an  inch  apart  with  two  blue  lines,  one  just  inside 
of  each  red  line.  This  results  in  a  red  border,  lined  with  blue 
with  a  white  space  showing  in  the  center.  (See  Fig.  1.) 


26         SYSTEM  BUILDING  AMD  CONSTRUCTIVE  ACCOUNTING 

A  three  line  fancy  is  made  with  two  red  lines  with  one  blue  in 
the  center  without  the  white  space.  The  double  red  is  easily 
understandable.  Except  when  used  with  double  red,  it  is  cus- 
tomary to  have  vertical  border  lines  and  the  border  lines  at  the 
bottom  of  the  page  of  somewhat  lighter  construction  than  the 
border  at  the  top,  that  is,  if  a  four  line  fancy  is  used  at  the  top 
of  the  box  heading,  a  three  line  fancy  would  be  proper  for  the 
vertical  borders  and  double  lines  at  the  bottom.  If  a  three  line 
fancy  is  used  at  the  top  of  a  page,  double  red  lines  would  be 
suitable  for  the  vertical  borders  and  the  bottom. 

The  idea  of  this  border  scheme  is  to  give  the  sheet  in  the  space 
where  the  hand  written  work  is  placed  distinctive  setting  off  from 
the  main  heading.  The  vertical  rulings  within  the  borders  which 
separate  the  main  divisions  of  the  page  should  be  fairly  promi- 
nent, the  next  division  less  prominent,  and  the  unit  lines  in  the 
money  columns  of  faint  blue.  The  horizontal  lines  below  the  box 
headings  are  usually  of  faint  blue  lines,  every  fifth  line  being 
made  heavier  than  the  others  in  order  that  these  lines  may  be 
followed  across  a  wide  page.  The  spaces  between  horizontal 
lines  should  be  ruled  off  according  to  the  point  system,  that  is, 
seven  point  ruling  would  represent  spaces  7/72  of  an  inch  be- 
tween each  horizontal  line.  The  spacing  of  the  ordinary  type- 
writer is  six  lines  to  the  inch  or  12/72. 

Vertical  unit  money  columns  are  ordinarily  ruled  %  of  an  inch. 
This  ruling,  however,  may  be  varied  by  72nds  of  an  inch.  It 
is  customary  in  ruling  the  unit  lines,  wherever  four  lines  are 
placed,  to  make  the  third  unit  heavier  than  the  others;  the 
principle  being  to  have  the  heavy  unit  lines  represent  the  division 
between  hundreds,  thousands,  etc.,  taking  the  place  of  decimal 
points. 

In  designing  forms  for  the  printer  or  ruler,  the  punchings  and 
perforations  are  indicated  by  black  ink  and  also  if  lines  are  to 
be  printed  on  the  form  instead  of  ruled  they  are  indicated  by 
black  ink.  Some  accountants  show  the  punching  and  ruling  on 
their  forms  in  pencil,  indicating  on  each  line  the  color  which  is 
to  be  used  in  the  finished  form.  Others  rule  their  forms  in 
colored  ink.  Either  plan  is  practical  and  satisfactory  results  are 
obtained  from  each.  It  is  always  well,  however,  to  have  the 
printed  headings  on  the  design  show  in  ink,  as  the  printer  receives 
the  form  after  the  ruling  has  been  done  and  constant  handling 


RULING  AND  PRINTING  27 

of  copy  necessary  in  the  ruler's  office  often  blurs  the  printing  if 
made  in  pencil  and  in  some  cases  entirely  obliterates  it.  This 
makes  it  necessary  for  the  accountant  to  go  over  the  work  a 
second  time  or  obtain  unsatisfactory  results  from  his  printing. 
It  is  sometimes  necessary  to  indicate  the  punching  to  fit  certain 
binders  and  in  this  connection  difficulty  is  frequently  experienced 
in  determining  the  distance  from  top  and  bottom  of  the  page  to 
the  punching.  A  simple  rule  which  may  be  followed  is  as  follows : 

"Take  one  less  than  the  number  of  holes,  multiply  by  the  space  between 
the  holes,  deduct  the  result  from  the  height  of  the  form  and  divide  by  two. 
The  answer  gives  the  distance  from  the  top  of  the  page  to  the  punching 
and  from  the  bottom  of  the  page  to  the  punching,  center  to  center." 


CHAPTER  VII 
PACKFORD  AUTO  SALES  COMPANY 

GENERAL  SYSTEM  AND  PLAN 

The  system  of  accounts  used  by  the  Packford  Auto  Sales  Com- 
pany has  been  selected  as  a  typical  illustration  of  a  business 
having  a  large  volume  of  small  items  from  which  there  is  little 
profit  and  a  small  volume  of  large  items  from  which  the  greater 
part  of  the  income  is  derived. 

A  complete  set  of  forms  is  included  and  it  is  our  purpose  to 
discuss  in  detail  the  operation  of  the  accounting  system.  In 
connection  with  each  form  we  will  consider  its  purpose,  the 
source  of  information,  the  number  of  copies,  mechanical  work  of 
preparation  and  how  the  copies  are  distributed.  This  discussion 
will  be  followed  by  a  chart  of  accounts  and  an  explanation  of 
the  purpose  of  each  account  together  with  the  functions  of  any 
account  peculiar  to  this  business  or  operated  in  a  way  not  clearly 
evident  from  its  name  and  location  in  the  chart.  . 

It  is  presupposed  that  the  preliminary  investigation,  design  of 
the  system  and  installation  have  already  been  completed,  but  in 
order  that  we  may  be  in  possession  of  all  of  the  facts  relating 
thereto  we  will  review  in  brief  some  of  the  particular  points 
brought  out  by  the  preliminary  investigation. 

The  Packford  Auto  Sales  Company  is  a  Massachusetts  corpora- 
tion doing  business  in  Boston.  Its  chief  business  is  the  sale 
of  Packford  motor  cars,  Packford  trucks,  and  parts  and  equip- 
ment pertaining  thereto.  It  has  the  exclusive  agency  for  this 
line  of  cars  for  Boston  and  vicinity  and  maintains  a  service  sta- 
tion for  repairs  and  the  sale  of  parts  and  supplies.  The  company 
is  not,  however,  a  branch  of  the  Packford  Motor  Company  as  is 
often  the  case  in  the  automobile  business. 

The  company  rents  a  two-story  building  on  Commonwealth 
Avenue,  Allston.  The  first  floor  contains  the  salesrooms  with  the 
offices  and  stockroom  in  the  rear.  The  repair  shop  occupies  the 
entire  second  floor.  The  concern  also  owns  a  four-story  building 
on  Newbury  Street,  Boston,  which  it  uses  as  a  public  garage.  Here 

28 


PACKFORD  AUTO  SALES  COMPANY  29 

it  has  facilities  for  the  storage  of  about  two  hundred  and 
fifty  care. 

The  executive  officers  of  the  company  are  the  president,  vice- 
president  and  manager,  secretary  and  treasurer.  The  president 
is  not  actively  concerned  in  the  management  of  the  business ;  he 
acts  as  an  adviser  and  has  general  supervision  over  financial 
matters.  The  vice-president  and  manager  is  the  chief  executive 
officer.  He  is  responsible  for  the  general  conduct  of  the  business, 
and  has  charge  of  the  sales  force,  and  exercises  general  super- 
vision over  the  various  departments.  The  secretary  and  treasurer 
is  at  the  head  of  the  office  force.  He  takes  charge  of  the  corre- 
spondence, approves  all  disbursements,  signs  checks,  etc.  In 
addition  to  the  secretary  and  treasurer,  the  clerical  work  of  the 
office  requires  the  services  of  three  bookkeepers,  a  cashier,  a 
billing  clerk  and  two  stenographers. 

There  are  five  regular  salesmen  whose  duty  it  is  to  follow  up 
prospective  customers,  make  arrangements  for  demonstra- 
tions, etc. 

The  stockroom  is  in  charge  of  a  superintendent,  who  has  three 
assistants  under  him.  He  has  general  charge  of  the  purchase 
and  sale  of  all  parts,  supplies  and  equipment,  including  not  only 
running  parts,  but  accessories  such  as  tires,  tire  chains,  lamps, 
windshields,  etc.  These  parts  and  supplies  are  issued  upon  re- 
quisition to  the  garage  and  repair  department  and  are  sold  over 
the  counter  to  customers.  All  sales  made  in  this  department  are 
costed  from  information  contained  on  perpetual  inventory  cards. 
The  superintendent  of  the  stockroom,  with  the  approval  of  the 
manager,  makes  all  purchases  of  needed  supplies  and  is,  in  effect, 
the  purchasing  agent. 

The  repair  department  is  located  on  the  second  floor.  It  is 
in  charge  of  a  superintendent  who  has  under  him  an  assistant 
superintendent  and,  during  the  busy  season,  about  sixty-five  men. 
This  is  the  only  service  station  for  the  Packford  cars  for  Boston 
and  vicinity.  This  necessitates  the  keeping  of  a  complete  line  of 
running  parts  for  these  particular  cars  and  trucks.  Repairs  are 
also  made  on  other  kinds  of  cars,  particularly  second-hand  cars 
taken  in  exchange,  although  the  company  does  not  pretend  to 
operate  a  general  repair  department. 

The  repair  department  also  makes  all  needed  repairs  to  the 
company's  livery,  service,  and  demonstration  cars.  These  re- 


30        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

pairs  are  charged  to  the  proper  accounts  at  regular  selling  prices 
as  it  is  desired  to  know  the  full  volume  of  business  done  by  this 
department.  This  does  not  affect  final  profits  in  any  way  except 
in  certain  minor  instances  when  a  charge  is  made  to  an  asset 
account,  in  which  case  there  is  a  slight  anticipation  of  profits. 
The  repair  department  also  includes  equipment  for  making  tire 
repairs,  in  charge  of  a  competent  tire  repair  man. 

The  garage  superintendent  has  under  him  two  assistant  super- 
intendents during  the  day,  a  night  superintendent,  eight  em- 
ployees during  the  day  and  ten  during  the  night.  There  are  also 
two  chauffeurs  for  livery  service  and  an  operator  for  the  service 
car  which  is  provided  with  elevator  service. 

At  the  Commonwealth  Avenue  building  there  are  also  two 
chauffeurs  known  as  demonstrators  who  are  used  for  demon- 
strating cars  to  prospective  customers  and  who  are  occasionally 
used  for  livery  service.  There  are  also  several  floor  men  doing 
the  cleaning  and  sweeping,  polishing  the  stock  cars,  and  who  are 
of  general  service  about  the  sales  room. 


LIST  OF  FORMS 

PURCHASE  RECORDS 

Purchase  Requisition 

Purchase  Order 

Voucher  (Remittance  Advice) 

Voucher    (Office  Copy) 

Voucher  Register 

Voucher  Index 

CASH  RECEIPTS 
Cash  Received 

CASH  DISBURSEMENTS 

Currency  Voucher 

Traveling  Expense  Voucher 

Check 

Check  Register 

Daily  Cash  Report 

SALES  RECORDS 

Sales  Ticket 

Stock  Requisition 

Repair  Tag  (2  sides) 

Supplementary  Repair  Tag 

Sales  and  Cost  Journal 

Sales  Returns  and  Allowances 

Monthly  Bill — Repairs  and  Supplies 

(original  and  duplicate) 
Garage  Service  Slip 
Garage  Service  Sheet   (2  sides) 
Garage  Monthly  Bill 


FORM  No. 
1 
2 
3 
4 

5-L  and  5-R 
6 


8 

9 

10 

11 

12 


13 

14 

15 

16 

17  L  &  R 

18 

10 
20 
21 
22 


PACKFORD  AUTO  8 ALE 8  COMPANY  31 

GENERAL  RECORDS 

Car  Register  (bound  book)  23 

Garage  Directory  Card  (2  sides)  24 

Index  for  above  25 

Garage  Register  (bound  book)  26 

Time  Card  (2  sides)  27 

Pay  Roll  28 

Inventory  Card 

Analysis  of  Fixed  Assets   (bound  book)  30 

Insurance  Register 
Customers'  Ledger 
General  Ledger 

General  Journal  (bound  book)  34 

Trial  Balance  Book  for  General  Ledger — 
Stock  Form 

FINANCIAL  STATEMENTS 

Monthly  Balance  Sheet  (2  sides)  35 

Monthly  Trading  and  Profit  and  Loss  Statement 

(2  sides)  36 

Monthly  Analysis  of  Selling  and  Administrative 

Expenses  «*7 


CHAPTER  VIII 

PACKFORD  AUTO  SALES  COMPANY 
FORMS 


Punch  Order  Mo 

Dept                      I 

ate 

Serial  Mo 

The  following  orticlesare  required  by  this  department 

[ 

Ordered  from 

Ordered  bij 

Delivered 

Purpose  f 

or  which  required 

ob  tto 

Date  of  flequisi 

ioo|  Present    3toc 

i                  Approved 

For*,  Ho  1 

THE   PACKFORD  AUTO   6ALES    CO            ^KH 

REQUISITION 

Form  1 

Form  i  Purchase  Requisitions  and  Form  2  Purchase 
Order. — Purchase  requisitions  are  in  pad  form,  numbered  by 
the  printer,  each  department  being  furnished  with  a  pad.  A 
requisition  is  prepared  for  each  purchase,  except  purchases  of 
gasoline,  oils  and  cars.  A  requisition  is  made  out  in  duplicate 
by  any  one  in  the  department  and  approved  by  the  depart- 
ment head. 

The  original  requisition  is  sent  to  the  stockroom  where  a  pur- 
chase order  (form  2)  is  made  out  in  duplicate,  the  original  is 
forwarded  to  the  vendor  and  the  duplicate  arranged  in  alphabeti- 
cal order  and  retained  on  an  arch  file  in  the  stockroom  with  the 
purchase  requisition  attached.  The  duplicate  purchase  requisi- 
tion is  held  in  the  department  as  a  memorandum  of  items  ordered. 

When  invoices  are  received  they  are  immediately  sent  to  the 
superintendent  of  the  stockroom  for  comparison  with  the  dupli- 
cate of  the  purchase  order  retained  in  his  files.  The  invoice  is 
stamped  with  a  rubber  stamp,  designed  as  follows : 


Order  No 

Requisition  No 

Date  Goods  Rec'd . . 
Goods  Rec'd  by . .  .  . 

Prices  O.  K 

Extensions  0.  K.  . . 
32 


PACKFOIW  AUTO  SALES  COMPANY 


33 


The  superintendent  of  the  stockroom  fills  in  the  requisition  num- 
ber and  purchase  order  and  also  OK's  the  prices.  The  purchase 
requisition  and  purchase  order  are  now  fastened  to  the  invoice 
and  filed  in  an  unfilled  invoice  file.  These  papers  are  held  until 
the  goods  are  received  by  the  stockroom,  from  which  point  they 
are  distributed  to  the  departments  making  the  requisitions. 


Original                                                                                          Purchase    Order  Ho. 

ornc,5                 THE    PACKFORD     AUTO    5ALCSCO 

1091  COMMONWEALTH  AVE                           BOSTON  MASS                                                    293  NEWDUflY  ST 

To                                                                                                           Date 

Please  enter  our  order  for  the  following  goods  described   below  and 
chorqe  to  our  account                                                                        Terms 

Quantity 

Description 

Price 

Total 

SHIP  VIA 

FOB. 

Kindlg  acknowledge  order  and  state  when  shipment  will  be  made 

APPROVED  BY                                                                                  ORDERED   BY 

PLEASE  PLACE  OUR  ORDER  MO  Oh   IttVOlCE  PACKAGES  AND  CORRESPONDENCE 

Form  2 

When  the  goods  are  received  in  the  stockroom  they  are  un- 
packed, counted  and  compared  with  the  invoices,  and  the  clerk 
making  the  comparison  places  his  initials  in  the  stamp  impression 
opposite  the  item  "goods  received  by."  The  invoice  is  then 
sent  to  the  office  where  the  extensions  are  OK'd  and  the  invoice 
handled  through  the  accounts.  The  purchase  requisition  is  re- 
turned to  the  department  ordering  the  goods  where  the  super- 
intendent acknowledges  receipt  in  the  proper  space  on  the 
requisition  and  returns  same  to  the  stockroom  superintendent  to 
be  filed  with  the  purchase  order  in  the  permanent  completed 
order  file.  Credit  memorandums  for  the  return  of  merchandise 
to  vendors  in  this  system  are  the  regular  stock  form  kept  in  the 


34        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


Form   Ho  J 

VOUCHER  ho                       CHECK  Ho. 
MONTH                               NAME 
DATE  PAID                             ADDRESS 

DATE 

ITEMS 

DEDUCTIONS 

At-iounT 

THE  PACK  FORD  AUTO 
SALES  Co 

DEALERS  In 
PACKTORD   MOTOR  CARS 
PACKFORD  HOTOR  TRUCKS 
AUTOMOBILE   SUPPLIES 
AMD  ACCMSORIES 

Sole  Agents 
Ibr  Boston  and  Vicinity 

OFFICE  AMD  SALESROOMS 
1091  COMMONWEALTH  AVE 

GARAGE: 
293  MEW  BURY  ST 

WE    ENCLOSE  OUR  CHECK   IN   PAYMENT  OFTHE    ABOVE   ITEM5    IF  HOT 

CORRECT,  RETURN  BOTH  VOUCHER  Ann  CHECK  WITH  FJCPLAHATION  .  IF 
ACCEPTED  in  PAYI-IENT  OF  THIS  VOUCHER.  COPY  OF  WHICH  is  on  FILE  AT 

OOH  OFFICE.  MO   RECEIPT    IS    NECESSARY    OTHER  THAU  PROPER  EMUORSCnCnT 
OF  THE  CHECK                                    THE    PACKFORD      AuTO     SALES     Co 

Form  3 


Fbrm   rto  •* 

VOUCHER  Ma                          CHECK  Mo. 

DOHTH                                    MAHE 

DATE  PAID                                 ADDRESS 

DISTRIBUTION 

DATE 

1TEH3 

CCAUCTionb 

AMOUrtT 

COfWECT                                         PAYnEHT  AUTHORIZED 

ACCOUMTAMT 

Form  4 


PACKFORD  AUTO  SALES  COMPANY  35 

stockroom  where  they  are  filled  out  by  the  superintendent  when- 
ever purchases  are  returned,  showing  selling  price  as  well  as 
cost,  and  are  approved  by  the  secretary  and  treasurer.  The 
original  is  passed  to  the  billing  clerk  and  the  duplicate  retained 
by  the  stockroom  superintendent. 

Forms  3  and  4  Voucher  (Remittance  Advice)  and 
Voucher  (Office  Copy). — Voucher  (remittance  advice)  and 
voucher  (office  copy)  are  the  original  and  duplicate  of  the 
voucher  prepared  in  connection  with  the  voucher  register.  These 
forms  are  made  up  in  pads  of  50  sets  and  are  filled  out  when 
making  a  remittance  to  a  creditor. 

When  the  approved  invoices  are  received  from  the  stockroom 
superintendent  they  are  filed  in  an  audited  invoice  file  until 
the  payment  date.  When  payments  are  to  be  made  the  approved 
invoices  are  arranged  by  vendors  in  chronological  order  and 
vouchers  are  prepared,  one  for  each  vendor,  showing  the  voucher 
number,  name,  address,  etc.,  and  the  invoices  attached  to  the 
voucher. 

The  original  is  put  aside  to  be  used  as  a  memorandum  for  mak- 
ing checks.  The  distribution  is  put  on  the  duplicate,  which  is 
approved  by  the  treasurer  who  authorizes  payment,  and  it  is 
returned  to  the  bookkeeper  who  prepares  the  check  to  be  for- 
warded to  the  vendor. 

During  the  interim  between  approval  and  payment  all  unpaid 
vouchers  are  kept  in  an  unpaid  vouchers  file.  When  payments 
are  to  be  made  the  vouchers  are  withdrawn,  the  check  prepared 
and  forwarded  with  the  original  voucher  (remittance  advice) 
to  the  vendor;  the  duplicate  voucher  (office  copy)  is  filed  in 
numerical  order  after  the  check  number  has  been  inserted  thereon 
and  the  date  of  payment  noted  in  the  voucher  register. 

In  this  particular  system  the  vouchers  are  filed  numerically. 
There  is,  however,  another  method  of  filing  which  is  alphabetical. 
The  numerical  arrangement  facilitates  the  work  of  auditing  but 
necessitates  keeping  an  index  of  the  vouchers  in  order  that  those 
from  any  vendor  may  be  located.  Either  method  may  be  used, 
but  probably  the  more  common  is  the  numerical  arrangement 
with  the  index,  see  form  6. 

Form  5  Voucher  Register. — A  voucher  register  without  a 
purchase  or  accounts  payable  ledger  may  be  used  to  advantage 
where  the  number  of  creditors  is  small,  where  the  bills  are  paid 


36        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


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PACKFORD  AUTO  SALES  COMPANY  37 

promptly  and  where  there  are  but  few  items  of  purchases  re- 
turned. The  voucher  register  alone  should  not  be  installed  if 
the  above  conditions  do  not  exist,  as  the  operation  will  be  found 
to  be  very  difficult  unless  a  purchase  ledger  for  creditor's  ac- 
counts is  also  made  a  part  of  the  system. 

The  voucher  register  sheets,  form  5,  are  kept  during  the  month 
in  a  pinch  back  binder  and  are  transferred  at  the  end  of  the 
month,  after  all  postings  have  been  made,  to  an  extension  post 
binder  for  a  permanent  file. 

In  entering  a  voucher,  the  day,  name,  number  and  amount  are 
entered  from  the  office  copy  of  form  4  and  the  total  amount 
entered  in  the  vouchers  payable  column.  This  applies  to  all 
vouchers  payable,  except  those  due  the  Packford  Motor  Company 
'or  those  covering  sundry  items  such  as  a  credit  to  accounts  re- 
ceivable due  to  taking  in  an  old  car  or  the  payment  of  notes. 
There  is  a  special  column  provided  for  amounts  due  the  Pack- 
ford  Motor  Company.  In  making  entries  in  the  sundry  credit 
column,  the  number  and  letter  of  the  account  to  be  credited  are 
entered  in  the  account  column  and  the  check  column  is  to  be 
used  when  posting. 

The  entry  in  the  date  paid  column  is  inserted  from  the  check 
register  after  the  check  in  payment  of  the  bill  has  been  drawn. 
If  a  check  is  issued  in  part  payment  of  the  account,  a  memo  is 
made  in  the  date  column,  showing  date  and  the  amount  paid. 

In  the  event  that  a  voucher  has  been  entered  in  the  vouchers 
payable  column  and  it  is  later  desired  to  settle  the  account  by 
issuing  a  note,  a  journal  entry  is  made  as  follows: 

Debit  Vouchers  Payable   (E-5) 

Credit  Notes  Payable    (E-4) 

The  entries  thus  far  in  the  voucher  register  are  all  posted  to 
the  credit  of  the  various  ledger  accounts,  thus  bringing  on  the 
liability  for  amounts  due  creditors  which  is  reflected  in  the 
vouchers  payable  control  account. 

From  the  vertical  three  line  fancy  after  the  column  headed 
"sundry  credits,"  the  balance  of  the  columns  on  the  left  hand 
page,  and  all  of  the  columns  on  the  right  hand  page  are  posted 
to  the  debit  of  the  corresponding  ledger  accounts. 

The  total  amount  of  the  voucher  entered  in  the  credit  section 
is  distributed  to  the  proper  asset  or  expense  account  or  ac- 
counts in  the  distribution  columns  headed  to  cover  these  items. 


47079 


38        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

In  case  no  special  column  has  been  provided,  the  charges  under 
each  class  of  expense  are  entered  in  the  sundry  charges  column, 
the  proper  number  of  the  account  being  noted  under  the  letter 
assigned  to  each  expense  group,  or,  in  case  a  sundry  asset  ac- 
count is  to  be  charged,  the  sundry  debit  group  at  the  extreme 
right  of  the  page  will  be  used,  showing  the  letter  and  number 
of  the  account  in  the  account  column. 

The  accounts  N-ll  (tools  and  supplies  used  in  the  garage)  and 
P-ll  (tools  and  supplies  used  in  the  repair  department)  are  not 
charged  through  the  voucher  register,  the  debits  to  these  ac- 
counts being  made  by  journal  entries. 

At  the  close  of  each  month  the  voucher  register  is  footed  and 
the  equality  of  debits  and  credits  proved.  The  totals  of  all 
special  columns  are  posted  to  the  debit  or  credit  of  the  corre- 
sponding ledger  accounts.  The  sundry  columns  are  posted  in 
detail,  or,  if  preferred,  they  may  be  analyzed  and  one  posting 
made  for  the  total  debit  or  credit  to  each  account.  The  sundry 
accounts  representing  cash  expenditures,  ordinarily  debited 
through  the  voucher  register,  are  as  follows : 

L-4,  6,  7,  13,  15 

M-4,  6,  8,  9,  10,  13,  15,  16 

N-8,  9,  13,  15 

P-8,  15 

Sundry  debits     A-2,  3,  7 

B-ll,  12,   13 

and  all  charges  to  the  C  group  of  accounts.  The  other  accounts 
in  the  expense  groups  would  ordinarily  be  charged  through 
monthly  journal  entries  distributing  the  various  expenses. 


VOUCHER   Innex  CARD 


NAME 


Form  6 

Form  6     Voucher  Index  Card. — The  purpose  of  this  form  is 
to  accumulate  information  showing  where  invoices  from  any  par- 


PACKFORD  AUTO  SALES  COMPANY  39 

ticular  creditor  may  be  found.  The  cards  are  arranged  in  alpha- 
betical order  in  a  3"  x  5"  drawer  file,  and  show  the  name  of  each 
creditor;  in  each  small  block  above  the  faint  line,  the  date, 
below  the  faint  line,  the  voucher  number.  The  theory  under 
which  this  system  is  operated  is  that  the  card  is  made  up  when- 
ever a  voucher  is  prepared  for  payment  of  bills.  In  the  actual 
operation  of  the  system  this  is  not  the  case,  the  cards  being 
made  up  whenever  a  convenient  opportunity  occurs. 

Form  7  Cash  Received  Book. — This  form  is  kept  during 
the  current  month  in  the  same  pinch  back  binder  as  the  check 
register.  It  is  permanently  filed  in  an  extension  post  binder. 

The  column  headed  "form  of  remittance"  is  intended  to  show 
whether  the  payment  is  received  in  currency,  bank  check,  postal 
money  order,  express  money  order,  etc.,  and  the  total  amount 
of  the  remittance  is  entered  in  the  column  so  headed.  Any  dis- 
count which  the  customer  has  rightfully  taken  is  entered  in  the 
cash  discount  column.  These  two  columns  constituting  debits  to 
the  corresponding  ledger  accounts. 

The  remittance  is  distributed  in  the  credit  columns,  headed 
in  accordance  with  the  various  sales  or  income  accounts. 

Cash  sales  occur  at  the  stockroom  and  garage.  The  cash 
register  at  the  garage  is  provided  with  special  buttons,  repre- 
senting sales  accounts  J-8,  9,  11,  12,  13,  15  and  accounts  receiv- 
able, A-5  (b). 

An  analysis  of  the  register  tape  is  made  at  the  close  of  each 
day  and  one  entry  made  in  the  cash  receipts  book  for  the  cash 
received  at  the  garage.  The  special  button  for  account  A-5  (b) 
of  course  operates  to  credit  the  account  in  the  general  ledger 
known  as  A-5  (b)  which  is  the  accounts  receivable  carried  at  the 
garage. 

If  petty  cash  disbursements  are  made  at  the  garage,  a  receipt 
is  taken  therefor  using  the  currency  voucher  (form  8)  and  the 
garage  includes  such  currency  voucher  in  its  cash  settlement 
with  the  office. 

At  the  close  of  the  month  form  7  is  footed  and  the  equality 
of  debits  and  credits  proved.  The  columns  are  then  posted  to 
their  corresponding  ledger  accounts  as  follows: 

The  amount  of  remittance,  debit  A-l ;  cash  discounts  on  sales, 
debit  M-17 ;  accounts  receivable,  credit  A-5  (a)  ;  parts  and  sup- 
plies, credit  J-5 ;  car  equipment,  credit  J-6 ;  tires,  credit  J-7  • 


40        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


PACKFORD  AUTO  SALES  COMPANY 


41 


gasoline  and  oils,  credit  J-8 ;  repairs,  credit  J-10 ;  sundry,  credit 
J-15. 

The  column  headed  "sundry  credits"  is  intended  to  carry 
such  items  as  customers'  deposits  on  cars  and  interest  received 
on  the  bank  balance.  At  the  close  of  the  month  this  column 
is  posted  in  detail  to  the  general  ledger  accounts  affected,  the 
above  example  being  posted  to  the  credit  of  accounts  E-7  and 
J-16  respectively. 

Form  8  Currency  Voucher. — This  form  is  an  ordinary  petty 
cash  disbursement  voucher  on  which  is  entered  the  amount 
expended,  the  purpose  for  which  expended,  and  is  signed  by 


fbrm  no  ft 

Dotf 

No 

Received 

1 

CURREHCY 
from  THE 
for 

VOUCHER 
PACKFORD  AUTO  SALES  Co 

Charge: 

Acrnunt 

Acr  nnnt 

Bu 

•"1 

Form  8 

the  person  receiving  the  payment.  In  the  office  the  account  to 
be  charged  is  entered  and  whenever  it  is  necessary  to  replenish 
the  imprest  cash  fund,  the  vouchers  are  analyzed,  summarized, 
and  a  voucher  prepared  for  the  amount  of  disbursements  to 
date,  showing  the  distribution  of  payments.  This  voucher  is 
entered  in  the  voucher  register,  crediting  vouchers  payable  and 
distributing  the  disbursements  to  the  proper  asset,  liability  or 
expense  accounts  through  the  different  columns.  The  check  is 
drawn  and  entered  in  the  check  register  and  posted  to  the  debit 
of  vouchers  payable,  thus  balancing  the  item,  replenishing  the 
fund  and  distributing  the  disbursements  to  the  proper  ledger 
accounts. 

The  currency  vouchers  are  filed  away  in  bundles,  each  bundle 
corresponding  to  the  voucher  which  it  covers,  the  reason  for 
this  being  that  the  number  of  vouchers  would  make  too  bulky 
a  package  to  be  filed  in  the  regular  paid  voucher  files. 

Form  9  Traveling  Expense  Voucher. — This  form  is  made 
out  in  the  office  after  the  completion  of  a  trip  and  is  paid  from 


42        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


the  imprest  cash  fund.    The  voucher  is  used  in  the  same  man- 
ner as  theugh  it  were  a  currency  voucher,  the  only  difference 


PACK  FORD  AUTO  SALES    Co 
Traveling   Expense  Voucher 

Date 

Item 

Ami 

Fares 

FVom                         to 

- 

.. 

.. 

• 

Hotel 

At 

- 

. 

•• 

Sundry  Expenses 

Total 

Charge 
Approv 
Signal 

i 

*>r\ 

ire 

Form  0 

being  that  some  additional  information  is  shown,  analyzing  the 
expenses  of  the  trip. 

Form  10     Bank  Check. — This  form  does  not  differ  materially 
from  the  ordinary  bank  check  and  is  shown  with  the  forms 


1091  COMMON  WEALTH    AVE 
BOSTON  MA5&., 


192 


Pay  to  the 
order   of 


Dollars 


in  payment  of  Voucher  Mo. 
To 

CITY  TRUST   COMPANY 

BOSTOM   MASS 


copy  of  which  is  presented  herewith 
THE  PACK  FORD  AUTO  SALES    Co 

.  Treasurer 


Form  10 


simply  to  illustrate  the  type  of  check  used  with  this  system.    The 
canceled  checks  are  filed  attached  to  the  paid  vouchers. 

Form  ii     Check  Register. — Particular  attention  is  called  to 
this  form  inasmuch  as  the  columns  at  the  right  of  the  page  are 


PACKFORD  AUTO  SALES  COMPANY 


43 


44        SYSTEM  BUILDING  AND  COXtSTltL'CTIVE  ACCOUNTING 

intended  to  obviate  the  necessity  of  keeping  check  books  with 
stubs. 

The  amount  of  cash  received  which  is  to  be  deposited  as 
shown  by  the  cash  received  sheet  is  entered  in  the  deposit  column. 
The  amount  of  the  checks  drawn  as  shown  by  the  check  register 
is  entered  in  the  check  column.  The  balance  on  hand  at  the 
beginning  of  the  day  plus  the  deposit  minus  the  checks,  equals 
the  balance  on  hand  at  the  close  of  day. 

This  corporation  has  two  banks,  -the  office  receipts  and  dis- 
bursements being  kept  in  one  and  the  garage  receipts  and 
disbursements  in  the  other.  Therefore,  the  sum  of  the  two 
deposit  columns  will  equal  the  total  amount  of  receipts  for  the 
day.  The  total  of  these  columns  at  the  end  of  the  month  would 
equal  the  total  receipts  for  the  month. 

The  amount  of  the  check  column  on  this  sheet  is  distributed 
in  the  check  column,  according  to  the  bank  on  which  the  check 
is  drawn. 

The  check  register  sheets  are  kept  in  the  pinch  back  binder 
with  the  cash  received  sheets  during  the  month,  and  are  per- 
manently filed  in  an  extension  post  binder. 

In  order  to  transfer  funds  from  one  bank  to  the  other,  which 
is  frequently  necessary,  entries  are  made  as  follows : 

In  the  Journal 

De-bit  Exchange  checks    (B-17) 
Credit  Vouchers  payable   (E-5) 

In  Check  Eegister 

Debit  Vouchers  payable   (E-5) 
Credit  Cash  (A-l) 

In  Cash  Receipts  book 
Debit  Cash    (A-l) 

Credit  Exchange  checks  (B-17) 

The  check  for  exchange  of  funds  would  be  drawn  on  one 
bank  and  deposited  in  the  other,  the  above  cash  entries  being 
made  when  check  was  handled. 

Form  12  Daily  Cash  Report. — This  form  is  made  out  in 
triplicate  daily,  the  sheets  being  numbered  when  made  out  and 
dated  in  the  space  provided.  The  original  is  sent  to  the  vice- 
president  and  manager;  the  duplicate  to  the  secretary  and 
treasurer;  and  the  triplicate  retained  by  the  bookkeeper  who 
prepares  the  form. 

The  information  is  compiled  from  the  cash  received  sheets 


PACKFORD  AUTO  SALE8  COMPANY 


45 


and  the  voucher  register.  The  miscellaneous  receipts  are  arrived 
at  by  an  analysis  of  the  sundry  credit  column  in  the  cash  receipts 
book;  miscellaneous  disbursements  are  obtained  by  an  analysis 
of  the  sundry  debits  column  in  the  voucher  register. 

By  referring  to  the  form  it  will  be  noticed  that  it  is  provided 
with  three  amount  columns,  the  first  being  the  receipts  and  dis- 


Fortn  rv>  IZ 

THE  PACKFORD  AUTO  SALES   CO                              No  
BAILY  CASH  RETORT                             "\92  ; 

SUMMARIZED   AHALYSJS 

For  this 
Dale  on(i) 

1st.  OF  MONTH  TO  DATE 

lurrent  Yeav 

Previous  Year 

REfFlPTfi: 

Customers 

Cnf,h  Sa)e*> 

Mi-w-pllnnpoiui    (Show   Pc=loils) 

Total     RpffTptA 

RnlnnrP    per  la=,t  Report 

Pronf    Tatals 

niSRDRSEMEHTS 

Parkford  Motor   f.o: 

rnv-i 

Trurks 

Port*   nnrl    ftupolies 

Other  Trade    C.rpriitorS:  (  Shew  IletaiK) 

Pm,    Roll 

Miscellnncou*     (5hr,w   nptfnl=,) 

Total     ni^hur^empntA 

finlanrp    ot    flo«,e     nffhisdntp 

Prno-f     T,yrnl& 

Distribution  of  Ca&h  Balance 

C-itij  T^.ist   C.f.  _MI                                                                 ft 

First  Notional  Bonk 

Totnl  n=i  nbcve                                                                                  4 

Form  12 

bursements  for  the  day  covered  by  the  report,  the  second  column 
for  the  amount  of  receipts  and  disbursements  from  the  first  of 
the  month  to  date  in  the  current  year,  and  the  third  column 
for  the  same  information  covering  the  corresponding  period 
last  year.  At  the  bottom  of  the  sheet  the  bank  balance  is 
analyzed,  the  information  being  taken  from,  the  bank  balance 
columns  on  the  check  register,  form  11. 


46        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


Form  13  Sales  Tickets. — The  sales  tickets  are  made  up  in 
pads  of  one  hundred,  to  be  filled  out  in  triplicate,  and  are  num- 
bered by  the  printer.  Each  sales  clerk  is  provided  with  a  pad. 

Whenever  a  sale  is  made,  a  sales  ticket  is  headed  with  the 


^"=i3        SALES  TICKET" ~ 
THE  PACK  FORD  AUTO  SALES  Co 

1091    COMMONWEALTH  Avt 
Telephone  Connections 

BOSTON  MASS., 193  _ 


ADDRE5S 


Goods  received  os  above. 


Coet  of 

Tires Eqvipm't 


Fts.6:  SUP. 


Salesman 


Form  13 

date  and  name  in  the  spaces  provided ;  in  the  event  that  it  is  a 
cash  sale,  the  word  "cash"  is  inserted  in  lieu  of  a  customer's 
name. 

The  original  copy  of  the  sales  ticket  is  forwarded  to  the 
office,  the  duplicate  is  passed  to  the  customer,  and  the  triplicate 
retained  in  the  book  as  a  permanent  record. 

In  the  office  the  originals  are  placed  on  a  spindle  file  during 
the  day,  and  at  the  close  of  the  day  are  turned  over  to  the 
superintendent  of  the  stockroom  for  costing  from  the  perpetual 
inventory  cards. 

After  the  sales  tickets  have  been  costed  they  are  passed  to 
the  billing  clerk  for  billing,  and  then  returned  to  the  book- 
keeper for  entry  in  the  sales  and  cost  journal. 

Sales  of  cars  are  not  entered  on  sales  tickets,  each  sale  being 


PACKFORD  AUTO  SALES  COMPANY 


47 


treated  as  a  special  transaction,  and  so  entered  in  the  sales  and 
cost  journal  from  a  duplicate  of  the  sales  agreement  prepared 
on  a  letterhead  when  the  sale  is  made. 

Form  14     Stock  Requisition. — This  form  is  used  by  all  of 
the   departments;    each    department   is   provided   with   a   pad 


Dote 

Requisitioned  for 
Rep.  Tag    Mo. 
Garaqe 

no. 

Quantity 
Required 

Deecnptioo 

Quantity 
Delivered 

Ordered  by 

De|iveYe<n>y 

Received  by 

re™  no*                TOE;  PACKFORD  AUTO  SALES  CO 

Form  14 

blocked  by  the  printer  to  contain  one  hundred  sheets,  which  are 
numbered  when  printed.  Only  one  copy  of  a  requisition  is  pre-. 
pared  by  the  clerk  desiring  to  draw  material  from  the  stock- 
room. 

The  requisition  is  forwarded  to  the  stock  clerk  and  there 
filled,  the  party  requiring  the  material  giving  his  receipt,  and 
the  requisition  is  filed  in  numerical  order  in  the  stockroom 
as  a  record  of  delivery  of  the  material. 

Form  15  Repair  Tags. — These  tags  are  numbered  by  the 
printer,  and  the  supply  of  tags  is  kept  in  the  office. 

Whenever  a  car  is  brought  into  the  repair  shop  the  superin- 
tendent obtains  a  tag  from  the  office  and  notes  thereon  the 
repairs  which  are  to  be  made  and  fills  up  the  form  as  follows: 

The  date  the  car  is  received  into  the  shop ;  the  owner's  name 
and  address ;  the  make  and  number  of  the  car ;  the  manufacturer's 
number,  which  is  the  number  on  the  motor;  and  procures  the 
signature  of  the  owner  authorizing  that  the  repairs  be  made. 
The  tag  is  attached  to  the  car  and  the  entries  thereon  are 
made  as  the  repairs  progress. 

In  the  labor  section  of  the  card,  the  entries  are  made  by  the 
foreman  in  charge  of  the  men  working  on  the  car,  showing 


48        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


DATE 
RECD 
NAM 

\2J 

REPAIR  TAG  MO-  

DATE 
F)  WISHED 

\Cx 

3UAMT1TY               ITEM                      REQ  HO.  CHARGE       COST 

FORWARDED 

fAR-MAHF  ANH  H(\ 

MFGF 
MATU 

•S  MO. 

RE  OF  REPAIRS  TO  BE  rt  AD 

I  HEREBY  AUTHORIZE  THE  PACKFORD  AUTO  SALES  CO 
TO  MAKE;  THE;  REPAIRS  OUTLIMED  ABOXC 
ftir,NA-niRF 

LABOR 

DATE             WORKMAN'S  NAME           TIME   OtARGE     COST 

EQl 

aUANTlTY 

TOTAL 

IlPMEnT,  PARTS  AMD 

ITEM                       T> 

SUPPLIES 

EQ  MO.  CHARGE  COST 

TOTAL  OR  FORWARDED 

RECAPITULATION                       CHARGE    COST 

LABOH 
TIRES 
PARTS  AMD  SUPPLIES 
EQUIPMENT 
TOTAL 



TOTAL 

Obverse 


Form  15 


Reverse 


the  date  the  work  was  performed,  the  name  of  the  workman, 
and  the  time  spent  on  the  ear.  If  more  space  is  necessary,  form 
16  is  used,  heading  up  the  tags  as  required. 


PACKFORD  AUTO  SALES  COMPANY  49 

No  entries  are  made  in  the  charge  or  cost  columns  in  the 
labor  section  at  this  time,  but  when  the  repairs  are  completed 
the  superintendent  enters  on  the  tag  the  charge  to  the  cus- 
tomer, which  is  obtained  by  multiplying  the  total  number  of 
hours  expended  on  the  work  by  the  standard  rate  per  hour 
charged  for  repairs.  At  this  time  the  superintendent  of  the 
repair  department  also  enters  the  cost  of  the  workmen's  time 
as  determined  by  the  hourly  wage  paid  each  workman. 

It  may  be  well  to  state  at  this  time  that  repair  sales  cover 
labor  and  materials  only,  there  being  no  overhead  charge  added. 

If  equipment,  parts  or  supplies  are  used  in  the  repairs,  a 
requisition  for  the  material  is  made  on  form  14  and  sent  to 
the  stockroom.  The  tag  is  also  sent  to  the  stockroom  with 
the  requisition.  In  the  stockroom  the  superintendent  upon 
receiving  the  requisition  makes  the  entry  on  the  tag  under 
the  section  headed  "equipment,  parts  and  supplies"  for  the 
quantity.  He  also  notes  the  item  and  the  requisition  number 
covering  the  stock  issued  in  the  proper  spaces  as  his  authority 
for  issuing  the  materials,  and  notes  the  repair  tag  number  on 
the  requisition. 

When  the  repairs  are  completed,  the  superintendent  of  the 
repair  department  hands  such  tags  as  carry  items  of  equip- 
ment, parts  and  supplies  to  the  superintendent  of  the  stock- 
room for  entering  the  cost  of  these  items  from  the  card  in- 
ventory. The  superintendent  of  the  stockroom  also  notes  thereon 
the  charge  to  be  made  to  the  customer,  and  as  the  labor  items 
have  been  computed  before  the  tag  was  sent  to  him,  he  fills 
in  the  recapitulation  of  charges  and  costs  at  the  bottom  of  the 
tag  and  forwards  it  to  the  billing  clerk. 

When  repairs  are  paid  for  in  cash,  the  repair  tag  is  used 
as  a  sales  slip  and  is  handled  as  a  cash  sale. 

Repairs  on  cars  owned  by  the  company  are  made  in  the  same 
way,  except  that  the  amount  is  charged  to  an  expense  or  asset 
account,  as  the  case  may  be,  instead  of  charging  to  the  customer 
through  accounts  receivable.  The  accounts  which  might  be 
charged  for  this  service  are  as  follows: 

New  cars,  account  B-l ;  demonstration  cars,  account  B-4 ;  sell- 
ing expense,  account  L-15;  demonstration  expense,  account  L-4; 
second-hand  cars,  account  B-3 ;  livery  car  repairs  to  miscellaneous 


50        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

garage  expense,  account  N-15;  repairs  to  service  cars  to  service 
car  expense,  account  M-10. 

After  the  billing  clerk  has  prepared  the  invoice  to  the  cus- 
tomer, the  repair  tags  are  passed  to  the  bookkeeper  for  sum- 
marizing in  the  sales  and  cost  journal,  form  17. 

Form  1 6  Supplementary  Repair  Tags. — This  form  is  in- 
tended to  be  used  when  the  spaces  provided  on  both  sides  of  the 
regular  repair  tags  have  been  completely  filled  and  more  space 


v_y 

SUPPLEMENTARY  REPAIR  TAG 
Annmnrtft  To  RF.P  TAG  NO 

TOTAI 

Form  16 

is  necessary  in  order  to  record  either  labor,  or  equipment,  parts 
and  supplies  used  in  repairing  the  car.  In  the  event  that  addi- 
tional space  is  needed  for  both  labor  and  material,  two  cards, 
form  16,  are  used,  one  being  headed  "labor"  and  the  other 
"material." 

Form  17  Sales  and  Cost  Journal. — The  current  sheets  for 
this  form  are  kept  in  a  pinch  back  binder  in  the  same  cover 
with  the  current  sheets  for  sales  returns  and  allowances.  The 
permanent  file  for  this  record  is  an  extension  post  binder. 

When  the  billing  clerk  has  entered  the  sales  slips,  repair  tags, 
etc.,  on  the  bills,  he  turns  all  the  memoranda  over  to  the  book- 


PACKFORD  AUTO  SALES  COMPANY 


51 


\ 


a 


• 


52        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

keeper  who  arranges  together  all  charge  slips,  credit  memoranda, 
etc.,  and  numbers  the  entire  slips  for  the  day  with  a  numbering 
machine. 

The  sales  memoranda  above  referred  to  are  numbered  for  an 
entire  month;  that  is,  at  the  beginning  of  each  day's  business 
the  bookkeeper  starts  in  with  the  number  following  that  on 
which  he  closed  the  previous  day's  business.  At  the  beginning 
of  each  month  he  starts  again  with  number  1. 

After  the  memoranda  have  been  numbered,  they  are  entered 
in  the  sales  and  cost  journal  as  follows: 

The  day,  the  number  put  on  by  the  bookkeeper  with  the 
numbering  machine,  the  original  number  which  has  been  placed 
on  the  forms  by  the  printer  (the  bookkeeper  before  numbering 
arranges  each  series  of  memoranda  in  numerical  order  in  order 
to  prove  that  all  have  been  accounted  for),  the  name  of  the 
customer  and  the  amount  of  the  slip  which  constitutes  the 
charge  to  accounts  receivable.  If  there  is  any  item  not  charge- 
able to  accounts  receivable,  it  is  entered  in  the  sundry  debits 
column,  noting  against  the  item  the  account  to  be  charged. 
These  two  columns  constitute  the  only  debit  columns  in  the 
book.  The  other  columns  are  all  credits  to  the  center  of  form 
17-R,  which  up  to  this  point  does  not  differ  materially  from 
an  ordinary  sales  journal  except  that  there  are  two  debit  columns 
and  several  credit  columns.  The  balance  of  form  17-R  is  the 
cost  journal,  each  column  operating  as  a  debit  to  cost  of  sales 
and  a  credit  to  the  asset  accounts.  The  credits  to  the  various 
sales  accounts  are  distributed  in  the  proper  columns  as  is  indi- 
cated by  the  heading  of  each. 

In  making  the  entries  in  the  cost  section  of  this  sheet  the 
information  is  taken  from  the  same  slips  except  that  the  cost 
of  cars  which  are  sold  is  obtained  from  the  car  register,  as  is 
also  the  item  of  freight.  The  columns  in  the  cost  section  of 
the  journal  as  above  stated  are  both  debits  and  credits,  so  that 
two  postings  are  necessary  at  the  close  of  the  month. 

In  handling  the  cash  sales,  the  slips  representing  cash  sales 
for  the  day  are  numbered  last.  These  slips  are  summarized 
and  one  entry  is  made  for  the  charge  to  cash  sales.  This  makes 
necessary  the  analysis  of  the  cost  of  cash  sales  slips,  so  that 
the  cost  may  be  distributed  in  the  cost  section  of  the  sheet. 

In  operating  the  repair  department,  the  practice   followed 


PACKFORD  AUTO  SALES  COMPANY  53 

in  this  system  is  to  charge  all  of  the  labor  in  the  repair  depart- 
ment to  the  direct  labor  account  (P-l)  considering  the  entire 
amount  as  a  direct  labor  charge.  In  summarizing  the  cost  of 
sales  in  the  sales  and  cost  journal,  only  that  portion  of  the 
labor  applied  to  jobs  is  taken  up.  This  will  leave  a  balance 
in  the  direct  labor  account  which  it  is  assumed  is  lost  time  or 
labor  not  chargeable  to  repairs.  This  balance  is  carefully 
reviewed  in  order  to  determine  that  it  is  correct  and  actually 
represents  time  lost. 

At  the  close  of  the  month  form  17  is  totaled  and  the  equality 
of  debits  and  credits  in  the  sales  journal  section  proved.  The 
totals  of  the  columns  are  then  posted  as  follows: 

The  accounts  receivable  column  is  posted  to  the  debit  of  ac- 
counts receivable  account,  A-5  (a).  The  sundry  debits  column  is 
posted  in  detail  to  the  accounts  affected,  or  if  desired  the 
column  may  be  analyzed  and  one  posting  made  to  each  account. 
The  sales  columns  are  pasted  to  the  credit  of  the  following 
accounts : 

New  cars  J-l 

New  trucks  J-2 

Second-hand  cars  J-3 

Demonstration  cars  J-4 

Freight   sales  J-14 

Parts  and  supplies  J-5 

Car  equipment  J-6 

Gasoline  and  oil  J-8 

Tires  J-7 

Repairs  J-10 

The  amount  shown  by  the  total  of  the  repairs  column  is  only 
the  labor,  the  parts  and  supplies  being  entered  in  the  column 
so  headed  and  posted  to  the  credit  of  J-5,  and  the  equipment 
entered  in  the  column  so  headed,  and  posted  to  the  credit  of 
account  J-6. 

The  cost  section  of  the  journal  is  posted  as  above  stated  to 
the  debit  and  credit  of  the  various  accounts  affected.  The 
totals  of  the  columns  are  posted  as  follows: 

New  cars  debit  K-l,     credit  B-l 

New  trucks  debit  K-2,     credit  B-2 

Second-hand  cars  debit  K-3,     credit  B-3 

Demonstration  cars  debit  K-4,     credit  B-4 

Cost  of  freight  sales  debit  K-14,  credit  B-14 

Parts  and   supplies  debit  K-5,     credit  B-5 

Car  equipment  debit  K-6,     credit  B-6 

Tires  debit  K-7,     credit  B-7 

Repairs  debit  K-10,  credit  P-l 


54        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

As  above  stated,  inasmuch  as  the  repair  sales  column  includes 
only  labor,  the  repairs  cost  column  also  includes  only  labor 
and  is  credited  to  the  direct  labor  account. 

It  will  be  noted  by  referring  to  the  form  that  there  is  no 
provision  for  costing  sales  of  gasoline  and  oil.  The  cost  of 
these  sales  is  determined  by  a  physical  inventory.  At  the 
close  of  each  month  this  cost  is  obtained  by  deducting  the 
amount  on  hand  from  the  sum  of  the  amount  on  hand  at 
the  beginning  of  the  month,  plus  the  purchases  during  the 
month.  The  charge  to  cost  of  sales  account  K-8  is  made  by  a 
journal  entry  and  is  not  entered  in  this  book,  although  the 
sales  section  provides  for  entering  the  sales.  For  the  details 
of  this  journal  entry,  see  monthly  adjusting  entries,  p.  101. 

Form  1 8  Sales  Returns  and  Allowances. — These  forms  are 
retained  during  the  month  in  the  same  pinch  back  binder 
as  the  sales  and  cost  journal.  At  the  close  of  the  month  they 
are  filed  in  a  special  binder. 

The  sales  returns  and  allowances  are  charged  directly  to 
the  sales  accounts,  there  being  no  sales  returns  accounts  in  the 
general  ledger.  From  an  inspection  of  the  form  and  a  review  of 
the  detail  of  operations  for  form  18  it  will  be  seen  how  this 
form  applies.  The  postings  are  the  reverse  of  those  made  for 
sales. 

At  the  close  of  the  month  the  sheets  are  footed  and  the  totals 
posted  to  the  various  ledger  accounts  as  follows : 

Accounts   Receivable  credit  A-5 

Parts  and  Supplies  debit  J-5 

Car  Equipment  debit  J-6 

Tires  debit  J-7 

Repairs  debit  J-10 

The  sundry  column  is  analyzed  and  posted  to  the  debit  of  the 
sales  accounts  which  are  affected  by  returns  during  the  period. 

At  the  extreme  right  of  the  form  are  columns  intended  to 
operate  against  the  cost  section  of  the  sales  and  cost  journal, 
and  each  column  posted  twice  as  follows: 

Parts  and  Supplies  debit  B-5,  credit  K-5 

Car  Equipment  debit  B-6,  credit  K-6 

Tires  debit  B-7,  credit  K-7 

Repairs  debit  P-l,  credit  K-10 

The  sundry  column  is  intended  to  carry  the  cost  of  those 
items  not  provided  with  the  special  columns,  and  is  posted 
in  detail  to  the  accounts  affected. 


PACKFOIW  AUTO  SALES  COMPANY 


55 


56        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

There  is  a  particular  feature  in  connection  with  the  operation 
of  sales  returns  and  allowances  which  is  peculiar  to  this  busi- 
ness ;  that  is,  the  item  of  tire  adjustment. 

The  theory  of  tire  adjustment  is  as  follows: 

If  a  tire  is  guaranteed  for,  say,  three  thousand  miles,  and 
runs  only  two  thousand  miles,  the  adjustment  is  made  on  the 
three  thousand  mile  basis  and  a  charge  of  two-thirds  of  the 
price  of  the  new  tire  is  made  against  the  customer.  The  dealer 
turns  the  tire  over  to  the  manufacturer  and  receives  the  same 
credit  which  he  has  allowed  the  customer. 

The  bookkeeping  to  record  this  transaction  is  as  follows: 

A  sales  slip  is  made  for  the  new  tire  at  the  selling  price,  and 
is  entered  in  the  sales  journal  in  the  proper  column.  There  is 
noted  on  the  sales  slip  the  adjustments  which  have  been  made 
and  the  bookkeeper  makes  an  entry  in  the  journal  as  follows : 

Dr.  Vouchers  Payable  } 

>    Amount  of  the  adjustment 
Cr.  Accounts  Receivable    ) 

This  entry  operates  to  reduce  the  liability  of  the  company 
to  the  vendor  of  the  tires  and  to  reduce  the  amount  of  accounts 
receivable  due  from  the  customers,  thus  balancing  the  trans- 
action. 

When  a  part  is  returned  and  not  replaced,  the  entry  is  to 
charge  the  sales  account  affected  and  credit  the  customer,  enter- 
ing the  proper  amount  in  the  cost  section  for  the  cost.  This 
operates  to  restore  the  item  to  the  asset  account. 

In  the  event  that  the  Packford  Auto  Sales  Company  is  to 
be  reimbursed  for  its  expenditures  by  the  vendor,  or  that  an 
allowance  is  to  be  made,  an  entry  is  made  in  the  journal  charg- 
ing vouchers  payable  and  crediting  the  asset  account  affected. 
This  operates  to  remove  the  item  from  the  inventory  and  to 
reduce  the  company's  liability  to  the  vendor.  In  the  event 
that  a  new  tire  is  given  for  a  defective  one,  the  sale  is  not 
reversed.  No  sales  ticket  is  made,  but  a  journal  entry  is  made 
charging  vouchers  payable  and  crediting  the  asset  account 
(B-7)  for  the  tire. 

Form  19  Monthly  Repair  Bill. — This  form  is  made  in  dupli- 
cate, the  entries  being  taken  daily  from  the  various  forms  re- 
ceived by  the  billing  clerk;  that  is,  the  charge  sales  slips,  the 


PACKFORD  AUTO  SALES  COMPANY 


repair  tags,  and  the  credit  memoranda.    The  bills  are  kept  dur- 
ing the  month  in  a  drawer  file. 

At  the  close  of  the  month  the  recapitulation  is  made  at  the 
bottom  of  the  bill,  and  the  original  sent  to  the  customer.  The 
duplicate  is  filed  in  a  correspondence  file,  in  which  each  cus- 
tomer is  provided  with  a  manilla  folder  in  which  his  bills  are 
segregated.  The  folders  are  arranged  in  alphabetical  order, 


MONTHLY   REPAIR  DILL 

THE  PACKFORD  AUTO  SALES  COMPANY 

1091  COMMONWEALTH  AVE 

BOSTON    


192 


REPAIRS  AMD  SUPPLIES  FOR  THE  MONTH  ENDING 


DATE 


SALES  OR 
CREDIT  MO. 


ITEM 


CREDITS 


1 

1 



^  ^1 

~~ 

""""—11 

1 

1 

TOTAL  CHARGES  &  

1 

TDTAl  .  f.REDlTS 

1 

tSFT    THARGF.S     ft 

1 

Form  19 

one  year's  bills  being  filed  in  each  folder,  and  at  the  close  of 
the  year  they  are  filed  away  in  bundles  as  a  part  of  the  perma- 
nent record. 

The  total  of  the  bills  is  reconciled  with  the  ledger  postings  made 
through  the  sales  journal  during  the  month  and  the  total  of 
the  statements  proved  with  the  control  accounts  in  the  general 
ledger.  The  bills  are  then  forwarded  to  the  customers  in  the 
usual  way. 

Form  20  Garage  Service  Slips. — These  forms  are  made  up 
in  pads  and  numbered  by  the  printer.  They  are  blocked  in  sets 
of  three,  and  are  issued  in  triplicate,  the  original  being  passed 
to  the  garage  office,  the  duplicate  to  the  customer,  and  the 


58        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


triplicate  retained  in  the  salesman's  book.  After  the  garage 
service  slip  has  served  its  purpose,  it  is  filed  away  in  a  box  or  in 
bundles.  The  detailed  explanation  of  the  use  of  the  slips  is 
included  under  a  description  of  form  21. 


rwn,n        '    SERVICE  SLIP 

THE  FACKFOHD  A.  5.  Co  GARAGI 

293  NEWBURY  ST. 

Telephone  Connections 
RnftTftN    MAR.S 

192 

M 

MMBM 

i 

Wnshinrjnnrl  Relishing 

Liveru    firrvice 

3 

4 

5 

Gamine               anlfi  (3> 

6 

Hi) 

7 

fttornap 

a 

9 

Ift 

1  1 

Stinctru  Sn)e« 

12 

13 

14 

IS 

5alesrnan'8 
ho                                   Ho 

Form  20 

Form  21  Garage  Service  Sheet. — This  sheet  is  made  out  in 
duplicate,  a  sheet  for  each  customer.  The  superintendent  of 
the  garage  enters  on  the  garage  service  sheet  the  charges  as 
the  service  slips,  form  20,  are  turned  in  at  the  close  of  each 
day.  At  the  end  of  the  month  the  charges  are  computed  and 
the  total  made  up.  During  the  month  the  service  sheets  are 
kept  in  a  drawer  file. 

The  numbers  are  printed  on  the  form  when  it  is  made  up, 
so  that  the  garage  superintendent  must  of  necessity  account 
for  all  the  slips  which  have  been  issued  to  him. 

"When  the  sheets  are  completed,  or  at  the  end  of  the  month, 
they  are  turned  over  to  the  billing  clerk,  who  makes  the  monthly 
garage  bill.  You  will  note  by  referring  to  the  form  that  the 
rates  for  various  services  are  printed  on  the  back. 


PAVKFORD  AUTO  SALES  COMPANY 


59 


MAM5 

CAR-M/ 
Kmr 

0                                               0 

THE  PACKFORD  AUTO  SALES  Co. 

GARAGE  SERVICE  SHEET 
MONTH  ENDtnt 

ADDRESS 

WE  AMD  NO. 

OF  STORAGE— 

rLOOR 

.^p^ 

CE: 

Nft 

DATE 

SUF 
no 

STi 

\".Ao 

?Si 

G/M-S|]CHAR(iF£ 

rr^sos 

>>4AR(iC3 

GKAUGCS 

1 

2 

1  

1  r 

i  

[ 

** 

3fc»^_ 

1  —  ' 

"'  —  1 

~~—  ~—  ^_—       1 

h 

B 

I" 

A]  \   1 

II    II 

TOTAL   CHAP3E 
FOR  MONTH 

FOLIO 

MUMBER 

Form  21    (Obverse) 


SCHEDULE  OF  RATES 


STORAGE 


FULL: 

Touring  Cars  I  30.00  per  month 

Limousines  $  3500  per  month 

Trucks  S  35.00  per  month 

TRAnSlErtT  »    1. 50  per  day 


PLAIN: 

All  Cars  *20.00per  month 

DAY  »IO.OOper  month 

MIGHT  »!5.00per  month 

DEAD  >  1 0.00 p«r  month 


WA5H1HG  AOD  POD5HinC     -     »L50 


LIVCRY 


Car  and  Chauffeur      7  passengers        *  4.00  per  hour      Car  anly  $10.00  dag 

Car  and  Chauffeur        5  passengers        *300perhour  Chauffeur  only    S  0.75  per hr 


Form  2 1    (  Reverse ) 


60        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


A  more  detailed  description  of  the  operation  of  this  form 
is  included  in  the  instructions  for  operating  form  22,  which 
is  merely  a  summary  of  form  21,  gathering  the  information  so 
that  the  customer  may  have  in  compact  form  the  details  of  the 
charges  against  him. 

Form  22  Garage  Bill. — As  stated  under  the  explanation  of 
form  21,  this  form  is  not  absolutely  necessary,  as  it  is  similar 


(GARAGE:  BILL) 
THE.  FACKroRD  AUTO  SALES 


1091   Commonwealh   Ave., 

BOSTON 


GARAGE    SERVICE  TOR  THE  MOMTH  ENDIHG 


Storage; 


Gasoline 

Oil 

Livery 

Sundry  Charges 


time   $1.50 
<jals.  @ 
qts.    @> 


Form  22 

to  form  21,  but  is  intended  to  present  in  a  condensed  form  the 
charges  against  a  customer  during  the  month.  The  billing  clerk 
makes  out  the  bill,  form  22,  for  each  customer  from  the  informa- 
tion shown  on  form  21,  which  is  attached.  The  bills  and  the 
service  sheets  are  turned  over  to  the  sales  record  bookkeeper 
and  he  separates  the  original  and  duplicate  of  form  21,  retains 
the  duplicate  and  passes  the  original  bill  to  the  mail  clerk  for 
mailing.  The  duplicate  bills  are  arranged  in  alphabetical  order, 
and  the  totals  are  posted  to  the  debit  of  the  customers'  accounts 
in  the  garage  accounts  receivable  ledger.  The  folio  used  for 
this  posting  is  entered  from  the  ledger  to  the  proper  space  on 
form  21.  The  number  of  form  21  is  used  as  a  reference  in  the 
accounts  .receivable  ledger. 

"While  posting  these  bilk  to  the  customers'  accounts  the  clerk 


PACKFORD  AUTO  SALES  COMPANY  61, 

must  make  an  analysis  of  the  charges.  A  sheet  of  analysis  paper 
of  the  same  size  as  form.  21  is  used  and  the  columns  headed  as 
follows : 

Sheet  No. 

Total  Charge 

Storage 

Washing  and  Polishing 

Gas  and  Oil 

Sundry  Sales 

Sundry  Service 

The  columns  are  footed  and  the  equality  of  the  total  and 
distribution  proved.  One  entry  is  then  made  in  the  sales  and 
cost  journal  for  the  footings  of  the  analysis  sheet.  The  total 
charges  to  the  customer  are  entered  in  the  accounts  receivable 
column  and  the  analysis  columns  are  distributed  to  the  different 
sales  accounts  through  the  proper  columns  as  follows : 

Washing  and  Polishing  J-12 

Gas  and  Oil  J-8 

Livery  J-13 

Sundry  Service  J-15 

Sundry  Sales  J-9 

The  posting  is  then  made  direct  from  the  sales  and  cost  journal 
to  the  proper  controlling  accounts  in  the  general  ledger. 

This  entry  in  the  sales  and  cost  journal  is  made  after  the 
regular  sales  and  costs  have  been  entered.  Thus,  there  are 
two  credits  to  the  sales  accounts,  one  of  which  is  from  the 
regular  sales,  the  other  from  the  garage  sales.  The  object  of 
this  method  of  handling  is  to  ascertain  the  income  from  each 
source. 

After  the  postings  have  been  made  forms  21,  22  and  the 
analysis  sheets  are  filed  in  a  permanent  canvas-covered  extension 
post  binder. 

Form  23  Car  Register. — This  is  a  bound  book  of  one  hun- 
dred pages  and  constitutes  a  record  of  the  cars  and  trucks  owned. 
A  separate  section  is  set  aside  for  each  class  of  equipment,  that 
is,  new  cars,  new  trucks,  second-hand  cars,  etc. 

The  entries  are  made  by  the  bookkeeper  who  has  charge  of 
the  voucher  register  at  the  time  the  purchase  is  vouchered. 
Entries  are  placed  on  every  other  line,  thus  allowing  sufficient 
space  for  memoranda  regarding  any  particular  item.  The  car 
register  can  be  verified  by  a  physical  inventory  of  cars  on  hand. 
No  postings  are  made  from  this  book.  The  operation  is  as 
follows : 


62        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


PACKFORD  AUTO  SALES  COMPANY 


63 


The  column  headed  "date  of  invoice"  is  intended  to  carry  the 
date  the  car  is  purchased  or  date  of  transfer,  if  a  car  is  trans- 
ferred from  one  classification  to  another.  The  second  column 
shows  either  the  name  of  the  party  from  whom  the  car  was 
bought  or  the  account  from,  which  it  was  transferred.  The 
description  is  intended  to  be  brief,  for  example,  touring  car, 
runabout,  etc.  The  manufacturer's  number,  date  of  arrival, 
freight  charge  and  invoice  price  are  self-explanatory. 

The  group  of  columns  headed  "extra  equipment  and  repairs" 
are  intended  to  carry  only  such  repairs  as  increase  the  value 
of  a  car. 

The  abbreviations  SS  or  RT  No.  indicate  the  service  sheet  or 
repair  tag  number,  covering  the  added  equipment  or  repairs. 
The  balance  of  the  sheet,  including  the  total  cost  column,  is 
not  filled  out  until  the  car  is  sold  and  at  that  time  the  freight 
is  not  included  in  the  total  cost,  as  there  is  a  separate  account 
in  the  general  ledger  carrying  freight,  but  in  the  selling  price 
column  the  freight  is  included. 


? 

i 

I 

OWNER'S  HWIE 

ADDRESS 

TYPt  or  CAW 

DATE  PROMISED 

HC&  HO 

DATE  ENTERED 

SPACE  "0 

DATE  STOBA6C  ExnntS 

tlAHE  OF  CHAUFFEUR 

I 

i 
1 

E 

ADDRESS 

6w£R  pERaons  AUTHARIZED  TO  o°eHATECAR 

REMARKS 

( Obverse ) 


Form  24 


( Reverse ) 


Form  24  Garage  Directory  Card. — This  form  is  used  to 
enable  the  floor  man  to  locate  any  particular  car.  The  cards 
are  kept  in  a  rack,  one  rack  being  provided  for  each  floor, 
although  all  racks  are  located  in  the  garage  office.  The  first 
two  lines  show  the  owner's  name  and  address;  the  rack  in 
which  the  card  is  filed  indicates  the  floor,  and  the  location  of 
the  card  in  the  rack  shows  the  space  occupied  by  the  car  on 
that  floor.  The  cars  are  located  by  the  assistance  of  form  25, 
in  the  event  that  the  exact  location  of  the  car  is  not  known. 

Form  25  Index  for  Garage  Directory  Card. — This  is  a 
3"x  5"  card  kept  in  a  drawer  file,  arranged  alphabetically,  the 
purpose  being  to  locate  the  space  in  which  a  truck  or  car  is 
kept.  It  will  be  noted  that  form  24  is  intended  to  show  not  only 


64         SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


the  location  of  the  car  in  the  garage,  but  the  person  authorized 
to  operate  it,  while  form  25  is  used  for  the  purpose  of  definitely 
locating  a  car  in  the  garage. 


NAME 

ADDRESS 

TEL 

MAKF  or  CAB 

RE.R  Na 

Finrtp 

STALL  No. 

REMARKS: 

Form  25 

Form  26  Garage  Register. — This  is  a  bound  book  and  is 
required  by  law.  It  is  not  intended  for  transients,  but  for  reg- 
ular storage  customers  and  is  supposed  to  be  signed  by  the 
operator.  The  information  contained  therein  shows  the  time  of 


Form  tlo.l'u 

GARAGE    REGISTER 

DATC 

REGISTER  NO 
aLETTER.IFAMY 

TIMEOFEMTft 
IMG  GARAGE 

TIMEOFLEAV- 
IflG  GARAGE 

OPERATOR'S  OR  CHAUFFEUR'S  MAHE 

AM. 

pn 

A.M. 

P.M. 

,—      — 

^^•^ 

i—  •  —                              *H 

—  „ 

.    —  -— 

'-^ 

Form  26 


entering  and  leaving  the  garage  during  the  day  and  is  required 
in  order  to  enable  the  officials  to  definitely  trace  the  movements 
of  any  particular  machine. 

Form  27  Time  Card. — This  is  a  standard  stock  form  of 
time  card  with  the  heading  of  "Packford  Auto  Sales  Company" 
printed  thereon.  There  are  two  time  clocks,  one  located  in  the 
garage  and  one  in  the  office. 


PACKFOBD  AUTO  SALES  COMPANY 


65 


The  pay  week  ends  Thursday  night,  the  men  receiving  their 
wages  on  Saturday  up  to  and  including  the  previous  Thursday. 
A  set  of  cards  is  made  up  for  each  clock  and  is  placed  in  the 
out  rack  Thursday  night  for  use  Friday  morning.  When  the 


THF  FACKFORD  AUTO  SALES  Co 

WCEK  EKD1HG                                                192 

Mo 

NAME 

a 

MORNING 

AFTERNOON 

OVERTIME 

i 

IN 

OUT 

m 

OUT 

in 

OUT 

ncrt. 

TUE. 

WED 

THU 

FW 

SAT 

St'M 

TOTAL  TIME 

RATE: 

MRS 

1 

TOTAL  WAGES    FOR  WEEK 

THIS  5fDC  OUT 


Form  27  (Obverse) 


Form  27   (Reverse) 


cards  have  served  their  purpose  in  preparing  the  payrolls  they 
are  filed  away  in  bundles.  It  does  not  seem  necessary  to  go 
into  further  details  in  regard  to  the  operation  of  the  time-card 
system,  as  the  method  of  operation  is  according  to  the  almost 
universal  plan. 

Form  28  Payroll. — This  is  a  standard  form  of  payroll  and 
except  for  the  end  of  the  pay  week,  does  not  differ  materially 
from  the  ordinary  payroll  sheet. 

In  the  actual  operation  of  the  form  the  names  are  entered 
by  groups,  that  is,  the  direct  labor  of  the  repair  department  is 
grouped  together  and  a  space  is  then  left  on  the  sheet  or  in 
the  book  and  the  indirect  labor  entered.  There  are  separate 
classifications  or  groupings  for  the  garage,  superintendence, 
salesmen,  demonstrators,  officers,  office  clerks,  livery  and  service. 
The  purpose  of  this  separation  by  groups  is  to  classify  the  wages 
paid  by  departments  and  to  assist  in  making  the  charges  to  the 
corresponding  operating  accounts. 


66        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


The  total  time  which  an  employee  has  worked  through  the 
week  is  multiplied  by  his  rate  per  hour  and  the  amount  earned 
placed  in  the  proper  column.  The  deductions,  if  any,  are  entered 


in  the  deduction  column  and  the  net  amount  extended  in  the 
column  so  headed.  Each  section  is  then  totaled  and  two  vouchers 
prepared,  one  for  the  garage  payroll  and  the  other  for  the 


PACKFORD  AUTO  SALES  COMPANY 


67 


general  payroll  and  two  checks  are  drawn,  one  on  each  bank. 
An  entry  is  made  in  the  voucher  register,  which  operates  as  a 
credit  to  vouchers  payable  and  a  charge  to  the  labor  account. 
The  checks  are  cashed  and  the  pay  envelopes  made  up.  After 
the  employees  have  been  paid  off,  the  sheets  are  kept  in  a  ring 
binder.  No  receipt  is  taken  from  the  employee,  each  name  being 
checked  by  the  paymaster  when  the  envelope  is  given  out. 

^\ 


Form  ho  M 

Dote   Price  hDate    FVice 

Unit 

Locotic 

n   1 

Date 

1a» 

Mm 

II 

ORDERED 

RECEIVED 

.SOLD 

Dote 

g«!  NO 

JJLOri 

SBJS 

Od   Mo 

Uuon 

Hoi* 

Solf  Me, 

Qion 

Bol 

tbte 

SolciM^j 

Qwan 

Do) 

Dot* 

6otp  ho 

Quon 

Bol 

Form  29 

Form  29  Inventory  Card. — This  form  is  kept  in  the  stock- 
room by  the  stock  clerk.  One  card  is  used  for  each  item  of 
stock,  the  name  of  the  item  being  placed  on  the  tab.  The 
cards  are  grouped  in  the  files  by  main  divisions  as  shown  in 
the  classification  of  parts  and  supplies.  Each  main  division 
is  subdivided,  the  subdivisions  being  arranged  alphabetically. 

A  physical  inventory  of  stock  is  made  each  time  the  quan- 
tity of  any  particular  unit  falls  to  the  minimum.  When  the 
card  does  not  agree  with  the  physical  inventory,  an  analysis  is 
made  to  locate  the  discrepancy  and  the  card  is  adjusted  in  red 
ink. 

The  mechanical  operation  of  the  form  is  to  enter  the  date, 
order  number  and  quantity  ordered  from  the  duplicate  pur- 
chasing order.  The  receiving  information  is  taken  from  the 
approved  invoice,  and  the  selling  information  is  entered  from 
the  sales  slips  or  material  requisitions. 


68        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

In  regard  to  the  price,  it  is  intended  to  consume  the  units  at 
each  old  price  before  issuing  units  at  a  more  recent  price.  The 
reverse  side  of  the  card  is  ruled  for  sales  columns  only. 

Form  30  Analysis  of  Fixed  Assets. — This  form  is  a  bound 
book,  its  purpose  being  to  record  the  purchase,  depreciation  and 
disposal  of  assets.  The  book  is  divided  into  sections  in  accord- 
ance with  the  classification  of  assets  as  follows: 

Garage  Building  and  Equipment 
Repair  Shop  Equipment. 
Office  Furniture  and  Fixtures 
Livery  and  Service  Cars 

Each  item  under  the  different  headings  is  numbered,  and 
all  numbers  are  placed  on  the  asset  either  with  a  brass  tag 
or  stamp.  At  the  time  of  opening  this  record  all  assets  on  hand 
at  that  time  must  be  entered,  after  which  the  items  are  entered 
when  purchases  are  made,  the  information  being  taken  from  the 
vouchers.  The  operation  of  the  form  is  perhaps  best  explained 
by  means  of  a  problem.  We  will,  therefore,  make  entries  in 
the  left-hand  page  as  follows: 

Date,  January  1,  1911;  No.  1,  omitting  the  description  and 
from  whom  purchased.  We  will  consider  the  cost  of  this  asset 
$864.00;  estimated  life,  four  years;  the  expiration  of  estimated 
life,  January  1,  1915;  annual  rate  of  depreciation,  25%; 
monthly  depreciation,  $18.00. 

Second  item:  date,  September  1,  1911;  No.  2;  cost  $1,500.00; 
estimated  life,  five  years ;  expiration  of  estimated  life,  September 
1,  1916;  annual  rate  of  depreciation,  20%  ;  monthly  depreciation, 
$25.00. 

Third  item:  March  1,  1912;  No.  3;  cost  $1,200.00;  estimated 
life,  five  years;  expiration  of  estimated  life,  March  1.  1917; 
annual  rate  of  depreciation,  20% ;  monthly  depreciation.  $20.00. 

In  the  right-hand  page  of  the  book  we  will  consider  item  No. 
1  was  disposed  of  September  1,  1915,  being  discarded.  In  the 
monthly  depreciation  column  enter  $18.00;  reserved  to  date, 
$864.00. 

The  period  from  January  1,  1911,  to  September  1,  1915.  is 
fifty-six  months,  but  inasmuch  as  the  estimated  life  was  con- 
sidered to  have  expired  January  1,  1915,  we  reserve  only 
$864.00,  or  the  total  cost.  For  the  period  from  January  1,  1915, 
to  September  1,  1915,  the  depreciation  is  adjusted,  as  will  be 
explained  later. 


PACKFORD  AUTO  SALES  COMPANY 


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70        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Item  No.  2  was  disposed  of  July  1,  1915,  by  sale  and  in  the 
monthly  depreciation  column  we  enter  $25.00,  and  in  the  reserve 
to  date  $1,150.00,  which  is  ascertained  by  multiplying  the  num- 
ber of  months  from  September  1,  1911,  to  July  1,  1915,  by 
$25.00,  the  monthly  depreciation.  Deducting  $1,150.00,  the 
reserve  to  date,  from  $1,500.00,  the  cost,  we  ascertain  the  present 
book  value  to  be  $350.00,  which  is  inserted  in  the  present  book 
value  column. 

We  received  from  this  sale  $500.00  which  is  placed  in  the 
imount  realized  column.  The  difference  between  the  present 
oook  value  and  the  amount  realized  is  $150.00,  which  is  entered 
in  the  credit  column  under  the  heading  ' '  adjustment  reserve  for 
depreciation." 

This  record  is  footed  in  pencil  each  month,  as  the  monthly 
depreciation  column  in  the  left-hand  page  will  change  each 
time  an  asset  is  acquired  or  disposed  of,  and  as  the  footing  of 
this  column  is  used  as  a  basis  for  the  monthly  journal  entry 
which  charges  the  operating  accounts  for  depreciation  of  assets. 
In  order  to  avoid  the  necessity  of  repeating  the  headings  of 
the  columns  in  explaining  the  problem,  we  will  assign  letters  to 
the  different  columns  as  follows: 

Monthly  Depreciation  (left-hand  page)     A 
Adjustment  of  Reserve  for  Depreciation  Cr.  B 
Monthly  Depreciation   (right-hand  page)   C 
Reserved  to  Date  D 
Present  Book  Value  E 
Amount  Realized  if  Any  F 
Adjustment  of  Reserve  for  Depreciation  Dr.  G 
Adjustment  of  Reserve  for  Depreciation  Cr.  H 

Between  January  1,  1911,  and  September  1,  1911,  the  monthly 
journal  entry  for  depreciation  was  a  debit  to  account  N-15  and 
a  credit  to  G-10  for  $18.00,  the  total  of  column  A.  At  Sep- 
tember 1,  1911,  when  item  No.  2  was  purchased,  the  monthly 
depreciation  column  footed  $43.00,  so  that  from  September  1, 
1911,  to  March  1,  1912,  the  entry  was  a  debit  to  N-15  and  a 
credit  to  G-10  for  $43.00. 

On  March  1,  1912,  item  No.  3  was  purchased  and  the  footing 
of  the  monthly  depreciation  column  was  $63.00.  The  entry  from 
March  1,  1912,  to  January  1,  1915,  was  a  debit  to  N-15  and  a 
credit  to  G-10  for  $63.00. 

At  January  1,  1915,  item  No.  1  had  reached  the  end  of  its 
estimated  life,  and  at  that  time  an  amount  of  $18.00  was  inserted 


PACKFORD  AUTO  SALES  COMPANY  71 

in  column  B,  which  column  is  used  only  when  an  asset  exceeds 
its  estimated  life.  When  -the  end  of  its  estimated  life  is  reached 
we  enter  the  same  amount  as  shown  in  column  A  in  column  B, 
still  charge  operating  expense  for  depreciation  of  the  items, 
but  stop  the  credit  to  the  reserve  account,  crediting  the  adjust- 
ment of  reserve  for  depreciation. 

From  January  1,  1915,  to  July  1,  1915,  the  date  on  which  item 
No.  2  was  sold,  the  entry  was,  therefore,  a  debit  to  N-15  for 
$63.00,  the  total  of  column  A,  a  credit  to  G-10  for  $45.00,  the 
difference  between  column  A  and  column  B,  and  a  credit  to 
M-18  for  $18.00,  the  total  of  column  B. 

At  July  1,  1915,  item  No.  2  was  sold  and  the  first  entry  on 
the  right-hand  page  was  made.  The  amount  $25.00  was  at  that 
time  inserted  in  column  C.  From  July  1,  1915,  to  September  1, 
1915,  when  item  Xo.  1  was  discarded  the  entry  was  a  debit  to 
N-15  for  $38.00,  the  difference  between  column  A  and  column 
C ;  and  a  credit  to  G-10  for  $20.00,  column  A  minus  B  minus  C ; 
credit  M-18  $18.00,  the  total  of  column  B. 

After  September  1,  1915,  the  entry  would  be  simply  debit 
N-15  for  $20.00,  column  A  minus  C ;  and  credit  G-10  for  $20.00, 
column  A  minus  B  minus  C.  As  stated  above,  columns  A,  B  and 
C  are  footed  in  pencil  at  the  end  of  each  month  and  postings  for 
depreciation  are  made,  using  the  above  general  formula  to  the 
various  accounts  as  follows: 

EXPENSE  RESERVE 

Garage  Building  &  Equipment        X-0  G-l 

Repair  Shop  Equipment  P-lo  G-2 

Office  Furniture  &  Fixtures  M-15  G-3 

Livery  Cars  N-15  G-10 

Service  Cars  M-10  G-10 

In  preparing  the  monthly  profit  and  loss  account,  the  adjust- 
ment of  reserve  for  depreciation,  account  M-18,  is  considered 
sundry  income. 

In  regard  to  the  use  of  columns  G  and  H,  the  following  rule 
would  govern.  If  column  F  is  greater  than  column  E  enter  the 
difference  in  column  H.  If  column  E  is  greater  than  column  F 
enter  the  difference  in  column  G. 

At  the  time  item  No.  2  was  sold,  of  course,  the  following 
entries  should  be  made : 

In  the  cash  book  you  would  charge  cash  $500.00  and  credit 
livery  cars,  C-10,  $500.00. 


72        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

In  the  journal  the  entries  would  be: 

Debit  G-10  $1,150.00;  credit  C-10  $1,000.00,  and  credit  M-18 
$150.00,  the  total  of  column  H. 

In  order  to  show  the  entries  under  varying  conditions  let  us 
assume  that  car  No.  2  was  sold  for  $250.00,  in  which  case  there 
would  be  an  entry  in  column  G  for  $100.00.  The  entries  then 
would  be  in  the  cash  book ;  debit  cash  $250.00 ;  credit  livery  cars, 
C-10  $250.00. 

The  journal  entry  would  be: 

Debit  G-10  for  $1,150.00,  debit  M-18  for  $100.00,  the  total 
of  column  G ;  and  credit  C-10  for  $1,250.00. 

Assume  that  car  No.  2  was  sold  for  $350.00,  thus  equalizing 
the  present  book  value.  No  entries  would  be  made  in  columns 
G  or  H,  but  the  entries  recording  the  sale  would  be  as  fol- 
lows: 

Cash  book,  debit  cash  $350.00 ;  credit  livery  cars,  C-10,  $350.00. 

In  the  journal  the  entry  would  be : 

Debit  G-10  $1,150.00;  credit  C-10  $1,150.00. 

Whenever  an  item  is  disposed  of  and  there  is '  an  amount 
inserted  in  column  B  against  this  item,  the  amount  is  crossed 
out  when  the  sale  is  made. 

Form  31  Insurance  Register. — This  is  a  standard  stock 
form  arranged  in  a  bound  book.  A  separate  section  is  set 
aside  in  the  book  for  each  expense  classification  and  the  proper 
heading  entered  in  the  space  provided  for  this  information. 

The  stock  cars  are  all  covered  by  one  blanket  policy.  The 
demonstration,  livery  and  service  cars  each  have  a  separate 
policy.  There  is  also  a  separate  policy  for  the  garage  building, 
for  the  repair  shop  equipment,  for  the  office  equipment  and  for 
the  stock. 

When  a  premium  is  paid  the  amount  is  charged  to  insurance 
premiums  prepaid  account  B-12.  The  policy  is  then  entered 
under  the  proper  expense  classification  in  the  insurance  register 
showing  the  information  as  indicated  by  the  headings  of  the 
columns.  The  premium  paid  is  entered  in  the  column  so  headed 
This  amount  is  then  divided  by  twelve  to  obtain  the  monthly 
charge  to  expense,  and  the  quotient  distributed  in  each  of  the 
monthly  columns. 

At  the  close  of  each  month  the  footing  of  the  corresponding 
month's  column  under  each  classification  forms  the  basis  of  a 


PACKFORD  AUTO  SALES  COMPANY 


73 


74        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

journal  entry  charging  expense  and  crediting  insurance  pre- 
miums prepaid,  account  B-12. 

The  expense  accounts  to  which  the  insurance  is  charged  by 
the  monthly  journal  entry  are  as  follows : 

Stock  Cars  L-12 

Demonstration   Cars  L-4 

Livery   Cars  N-15 

Service  Cars  M-10 

Garage  Building  N-9 

Repair   Shop   Equipment  P-15 

Office   Equipment  M-15 

Stock  L-15 

As  stated  above,  the  expense  accounts  are  charged  for  the 
amount  of  the  insurance  expired  during  the  month,  as  shown 
by  the  footing  of  the  monthly  column  in  the  insurance  register 
and  the  prepaid  insurance  account  B-12  credited  for  the  total 
amount  charged. 

Form  32  Customers  Ledger. — This  is  a  stock  form  loose- 
leaf  ledger  sheet  adopted  by  this  concern  as  a  customers  or 
accounts  receivable  ledger. 

Four  binders  are  used;  one  for  current  or  active  accounts 
and  one  for  transfer  accounts  with  general  customers,  and  two 
are  used  in  the  same  manner  for  the  garage  accounts. 

Postings  are  made  to  the  debit  of  this  record  from  the  sales 
and  cost  journal.  The  credits  are  taken  from  the  cash  receipts 
book  and  sales  returns  and  allowances,  and  in  some  cases  from 
the  journal.  At  the  close  of  each  month,  after  all  the  postings 
have  been  made,  trial  balances  are  taken  and  compared  with 
the  controlling  accounts  in  the  general  ledger.  The  accounts  are 
balanced,  the  book  ruled  up,  and  the  balances  brought  forward 
once  each  year  when  the  general  ledger  is  closed. 

It  will  be  noted  by  referring  to  the  form  that  there  is  but  one 
balance  column.  In  the  event  that  a  customer  has  a  credit 
balance  it  is  inserted  in  the  balance  column  in  red  ink. 

Form  33  General  Ledger. — This  is  a  stock  form  loose-leaf 
general  ledger  sheet.  The  current  sheets  are  kept  in  one  binder, 
and  when  the  sheets  are  filled  they  are  transferred  to  a  per- 
manent transfer  file.  The  chart  of  accounts  (see  page  83)  is 
used  as  an  index  and  the  accounts  are  arranged  in  the  general 
ledger  according  to  the  chart  with  letter  tabs  showing  the 
classification. 


PACKFOKD  AUTO  SALES  COMPANY 


75 


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After  all  postings  for  the  month  have  been  made,  including 
the  adjusting  entries,  a  trial  balance  is  taken  in  the  trial  balance 
book. 

The  use  of  the  trial  balance  book  is  not  absolutely  necessary 
inasmuch  as  the  details  could  well  be  taken  directly  to  the 
monthly  statements,  forms  35,  36  and  37,  but  it  has  been  found 
more  advantageous  to  use  the  trial  balance  book,  taking  four 
columns  for  each  month's  balances,  the  first  two  showing  the 
current  month  only  and  the  second  two  the  current  year  to 
date.  The  reason  for  this  treatment  is  that  it  facilitates  the 
preparation  of  the  profit  and  loss  statements. 

The  general  ledger  is  closed  once  each  year  and  at  that  time 
the  balance  remaining  in  the  profit  and  loss  account  is  closed 
to  surplus.  At  the  same  time  each  account  in  the  general  ledger 
is  balanced,  ruled  off  and  the  balance  brought  forward. 


GENERAL  JOURNAL 


Form  34 

Form  34  General  Journal. — This  is  a  bound  book,  more  or 
less  standard  in  its  arrangement,  and  is  intended  to  receive 
entries  for  which  no  other  special  book  is  provided. 

A  section  consisting  of  the  last  few  pages  of  the  book  has 
special  rulings  to  carry  the  monthly  adjusting  entries  so  as  to 
obviate  the  necessity  of  writing  the  entries  each  month  during 
the  year.  Short  sheets  are  provided  so  that  the  entries  for  each 
month  during  which  the  book  will  last  may  be  contained  in  the 
special  section.  Adjusting  entries  are  so  framed  that  they  need 
not  be  reversed;  for  example: 

Debit  Interest  Accrued  on  Notes  Receivable  (A-16) 
Interest  Received    (J-16) 

Credit  Interest  Accrued  on  Notes  Receivable   (A-16) 
"       Interest  Received    (J-16) 

By  referring  to  +he  above  example  it  will  be  noted  that  the 
entry  can  be  made  so  as  to  adjust  the  interest  accrued  account 


PACKFORD  AUTO  SALES  COMl'ANY  77 

to  represent  the  amount  accrued  at  the  end  of  the  month 
whether  it  is  necessary  to  increase  or  decrease  the  balance  shown 
at  the  close  of  the  previous  month. 

In  the  case  of  the  monthly  entry  bringing  on  the  cost  of 
gasoline  and  oil  sold  it  is  not  necessary  to  frame  the  entry 
both  ways  inasmuch  as  the  cost  would  not  be  reversed  and  would 
not  need  adjusting.  By  referring  to  the  monthly  adjusting 
entries  shown  on  pages  101  to  103  the  method  of  establishing  the 
entries  in  the  general  journal  can  be  easily  understood. 

Form  35  Monthly  Balance  Sheet. — This  form  is  intended 
as  a  statement  to  be  furnished  to  the  executives  of  the  business 
by  the  bookkeeper  at  the  close  of  each  month  and'  the  informa- 
tion shown  thereon  is  taken  directly  from  the  trial  balance  book. 

The  balances  of  the  accounts  under  the  A,  B,  C  and  D  groups 
are  inserted  in  the  amount  column.  The  previous  year's  figures 
are  inserted  in  the  proper  column  from  the  previous  year's 
statement,  and  the  increase  or  decrease  in  each  item  worked  out. 

The  liabilities  are  taken  from  the  balances  of  the  accounts  in 
the  E,  F,  G  and  H  groups  and  the  balance  inserted  as  the 
profit  or  loss  should  agree  with  the  net  profit  or  loss  as  shown 
on  form  36. 

Form  36  Monthly  Trading  and  Profit  and  Loss  State- 
ment.— This  form  is  made  up  with,  and  constitutes  a  part  of 
the  monthly  information  furnished  to  the  executives.  By  re- 
ferring to  the  form  it  will  be  noted  that  each  section  should  be 
worked  out  individually. 

The  sales  of  new  cars,  new  trucks,  second-hand  cars,  demon- 
stration cars,  parts  and  supplies,  car  equipment  and  tires  are 
taken  from  accounts  J-l  to  7  inclusive.  Inasmuch  as  the  sales 
returns  are  charged  directly  to  the  sales  account,  the  balances 
of  these  accounts  represent  the  net  sales.  The  costs  of  these 
items  are  taken  from  accounts  K-l  to  7  inclusive  and  the  differ- 
ence between  the  total  sales  as  shown  on  the  right-hand  pasre. 
and  the  total  cost  of  sales  as  shown  on  the  left-hand  page,  is 
inserted  on  the  line  indicated  as  the  profit  on  sales,  and  the  proof 
total  made. 

In  the  second  group  the  repair  sales  are  represented  by  the 
balance  of  account  J-10.  The  costs  of  repair  sales  are  ascertained 
as  follows: 

Direct  labor  represents  the  labor  charged  to  jobs  during  the 


78        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


PACKFORD  AUTO 

MONTHLY  BALANCE  SHEET 

ASSETS 

AMOUNT 

PREVIOUS 
YEAR 

MCREASE 

DECREASE 

f.URRfHT 

o 

Trrch  in  TVinUa 

Imprr<*t   Funrl 

Garaqp  Chnrft^  Rind 

rintfi  Rpff  ivnhle  

—  o~~ 

Cinrnne 

nppnc.i+1    wifh    Mnm.-ffvti>r<><i 

ArrrnpH     Iteme-. 

l—  O~ 

Totol   r.nrrent 

Trndinn   nnri  Wnrkina 

N»w  f  ors 

HpiMTrnrks 

APr«nd  Hnnd  rnrs 

Ph  JtSInd1"  A*n  p"".-f?r'''  

T,n<-  rqnipinont 

n^a 

Sundry  Rirthn«i<'^-finrnn»> 

-O- 

Arrrnerf    Lnhnr  nn  Ror>nir« 

Pro  paid    It^ms-. 

In^iirnnrc   Prominent 

T»»PQ 

FWiflht 

Total  Trndinq  and  Workinq 

(  i 

Totol  Current  find  Trndmq  ft  Wnrkmq 

Garcigp  Rnildinq  and  Equipment 

nfFireFurniturf  and  Ruturpc, 

c  j 

Livery  ftnd    fiprvire   f.rir<4 

Totol   F.xfd 

Goodwill  ond   fnvpeitmtnt^ 

rj 

rir>r,Hwill   find  r,nntrfict& 

Totnl    Gnadwill 

Totol  Assets 

Form  35   (Left) 

month  and  is  the  balance  of  account  K-10.  Lost  time  is  the  bal- 
ance remaining  in  account  P-l.  Indirect  labor  is  the  balance 
of  account  P-2,  power  P-8,  supplies  used  P-ll  and  miscellaneous 
expense  P-15.  A  footing  is  made  of  the  total  sales  and  total 
expenses  and  the  profit  or  loss  inserted  on  the  left-  or  right-hand 
page  as  the  case  may  be.  A  proof  total  is  made  for  this  section 
en  the  line  indicated. 


PACKFORD  AUTO  SALES  COMPANY 


79 


SALES     COMPAHY 

MONTHLY  BALANCE    SHEET          (Continued)                                                     I9a 

LIABILITIES 

AMOUMT 

PREV  OUS 

YEAR 

INCREASE 

DECREASE 

o 

r.urrpnt 

Hr-tpe\    Pnunhlp 

Ai  H.torl    Vnurhprs   Pni.nhV 

Pnrkfnrrt    MofrMr    Cn 

niv.dpndc. 

(  } 

ArrTuorl      H»mt\: 

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Tnxp« 

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D 

Tntfll    f.nrrcnt 

Flxprl 

./'"Y.j 

VJ 

Totnl    Fixed 

Rp^ervec,  i 

nppr«-in+ir>n  of  Cinrnqp  Hid  A-  Fnijin't 

n        *-*»r   n+inn    of  Rpomr   Shnn  Foi'in't 

ripprpont-mn  of  Offirp  Furn   ft   Fixt 

1  irsft  on  Rnrf  Actouola  

o 

Totnl    RpipTUf-^, 

Totnl  Fixed  ond   Reserves 

fr.pifnl- 

Tnpi  +  n)     fifnrk 

(~j 

Prnflt   nnd  Los«i 

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TfTTAI      1    IABIL1TIFR 

Form  35   (Right) 

The  next  section  of  the  statement  covers  garage  sales  and 
costs.  The  sales  are  as  shown  by  the  balances  of  accounts  J-8, 
9,  11,  12,  13  and  15.  The  costs  are  taken  from  the  following 
accounts;  gasoline  and  oil  K-8,  sundry  sales  K-9,  labor  N-l, 
superintendence  N-2,  power,  heat  and  light  N-8,  maintenance 
N-9,  tools  and  supplies  used  N-ll,  salaries  of  livery  chauffeurs 
N-13  and  miscellaneous  expense  N-15. 


80        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


PACKFORD    AUTO 

MONTHLY  TRAD  IMG  AMD 

COST  OF  SALES 

CURRErtT 
MONTH 

CURRENT 
YEAR  TO  DATE 

SAME  PERIOD 
LAST  YEAR 

INCREASE 

DECREASE 

H-w  Cors 

<^\ 

NpwTmr.k?; 

—  (J— 

Sprnnrl    HnoH    fnrfi 

Tlpnnr,nc.+  Tn-tinn    C.nt'. 

C.nr    Fquipment 

Tires 

f*\ 

-\J^ 

Totnl   Cost    of   Sales 

f\ 

Profit   on    Snips 

~^J^ 

Pror;f   Totnl  S 

Repnir    Dept     Exprnsrc,'. 

Tlirprt   l.nhor  rhavgprf  tr,,lobs 

\nA\rer.\    Lnbnr 

Power 

•ii.pplips  lUpd 

1  nf,t   Time    (Tliv-ert  Lnhnr) 

Mi?,(-pl)nnpriij<l     Fxpen*,e 

IDI 

Total   Expense 

Profit   on   Reooir   Hept    Snlea 

Prnof  Totals 

Garage3  Fxpenses: 

Saaiauot  «"^  0,1 

Sundry     Sntef; 

Lonr>r 

.Snpevintenrlpnrp 

Pnwpr    Hpril  nnd  LinM 

MniAtennnrp 

ftnpplipci  i,<jpH 

Sr.lnr.pe,  nf  Liveru  Chonf  fp.iT-1 

Miftre)Jnnonii=,  Expense 

_o_ 

Tntn)  Fxpen^e 

Profit  nn    Garane   hales 

Proof  T^0)s 

<?p))inn   ExppnftPc^ 

Arlnn'inist  rot  IVP   rxpfnfie'K 

_o  — 

Other  Expcnftp?, 

Tntprp^i    Charges 

Cash  Discount  on-ftolp^ 

I  n«,s  on  Rod    Accounts 

Adi  rri  Res  for  Dpprpciaimn 

_ry_ 

Total    Rxpenfies 

NET  PROFIT 

Proof   Totals, 

Form  36   (Left) 

The  sales  and  expenses  are  totaled  and  the  profit  or  loss  on 
garage  sales  inserted  in  the  left-  or  right-hand  page  as  the  case 
may  be  and  a  proof  total  made  at  this  point. 

The  final  section  on  the  form  is  a  summary  of  the  operations 
for  the  period.  The  gross  profit  on  sales  of  cars,  repairs  sales 
and  garage  sales  is  brought  down  in  the  space  marked  "total 
gross  profit  on  sales,"  the  other  income  as  shown  by  the  balances 


PACKFORD  AUTO  SALES  COMPANY 


81 


SALES    COMPANY 

PROFIT  ANOIO.S.S  STATFHFMT                                                132. 

SALES 

CU'RREMT 
MOMTH 

Cl'RHEMT 
YEAR  TO  DATE 

5AME  PERIOD 
LA5TYEAK 

ma 

iWSE 

DECREASE 

f~. 

NPW    rnrs 

y 

MPW  Trnrk", 

.Ser  r,nd    Hnnd  Cnr."=, 

nemonstrntinn  C,nt^ 

Pnrt«.  nnrl  ^iipplip"^ 

x-v 

Tirp 

*—  ' 

^>. 

Total    Snips 

vv 

Proof   Tata  la 

Rppnir   Snlp=,: 

ij 

Totnl 

LobS  on   Rppoir   Deot.  Salpi 

Proof   Totals 

Gnrrvfip    Snlp^i- 

Gn^nlinp    nnd   Oil 

Surclrij   finlpc, 

.Storrnp 

Wrt^hinq  nnrt    Poli^hinrj 

1  ivPrij 

^>. 

v-J 

Tntn!     Sole?, 

1  o^s  on   fiarane   Snleq 

Pr,-rf   Tvtols 

3  t.il    E^S   Pr-vT  ^  Seller 

/^N 

(hrni    down) 

W 

Dthpr     Inrr.ine 

!nfpre«vt    Fnrnmq1. 

fn_',h    ni«ir.mmt    rn    Purr  hc,<-,pc, 

Profits  nn   Frp.ght    5=inlp=, 

—  ?T  

"  MisreDnneciIr7  Inrrrnp 

v^ 

Tntn)      Inrornp 

NET     LnSS 

Form  36    (Right) 

of  the  accounts  J-14,  J-16,  J-17,  J-18  and  M-18,  if  the  account 
shows  a  credit  balance,  is  inserted  and  the  total  income  deter- 
mined. 

The  total  selling  expenses  and  demonstration  expenses  are 
taken  from  form  37  (see  instructions  for  use  of  form  37)  and 
inserted  in  the  proper  space  on  the  left-hand  page.  The  other 
expenses  are  then  entered  from  the  balances  of  the  expense 


82        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


PACKFORD  AUTO  .SALES    COMPANY 

ANALYSIS    OFSF.I.I.mr,    f\Hn  AnMINl.STRATIVF.  F.XPF.NSF.    ,              .    ,             11? 

SELLING  EXPENSE 

CURRENT 
MONTH 

CURRENT 
YEARTOBATE 

SAME  PERiOD 
USTYEAR 

INCREASE 

DECREASE 

-0- 

.Snl^c,mnn'«i  So?fiTif><\ 

Advprtisinq 

Demonstration    Fj<Dfn<w 

Sole=,mr,nX  TTnvplini]    Fxnfn'.p 

-0- 

Inhurance  nn  Stor.h  Gflrs 

K  t  fand  Ixp  o'nR^'n^Effif^t' 

Mi<,cp)lnnpo,,<i   St>l)inn   Exppnc.p 

f\ 

\J 

Total  Se))mo  Fxnpn«,p 

0 

ABniNlSTRATIVE  EXPEMSE 

Officer's  Salons 

Teleohone  nnrl  Tplenrnnh 

Posing                                  J       ' 

Trnvelmq  Fxr»>n=ip 

ntfirp  Si?oo]ie<;  ll'.pd 

OffireC  lerks  Sn)an<.<i 

_O— 

_o_ 

Vx^ 

Total  Administrotwe  Expense 

—  c\— 

v_/ 

Form  37 

accounts  as  follows:  interest  charges  M-16,  cash  discount  on 
sales  M-17,  loss  on  bad  accounts  M-5,  and  adjustment  of  reserve 
for  depreciation  M-18,  if  the  account  shows  a  debit  balance. 
The  expenses  are  added  and  the  difference  between  the  total 
income  and  total  expenses  is  the  net  profit  or  loss  for  the  month 
or  for  the  period.  This  amount  is  inserted  in  the  proper  space 
and  a  proof  total  for  the  sheet  made. 


83 

The  net  profit  or  loss  as  above  stated  is  then  carried  to  form 
35  and  should,  of  course,  balance  that  form. 

Form  37  Analysis  of  Selling  and  Administrative  Ex- 
pense.— This  form  is  intended  to  summarize  the  various  expense 
accounts  in  the  two  principal  groups  and  supports  the  two 
main  headings  on  the  profit  and  loss  statement,  form  36.  The 
amounts  are  taken  from  the  debit  balances  of  the  accounts  in 
the  L  and  M  groups. 

The  best  method  to  be  followed  in  preparing  a  chart  of  ac- 
counts to  accompany  a  report  for  a  system  is  to  submit  the  list 
of  accounts  in  typewritten  form,  although  the  graphic  chart 
may  be  used  if  desired. 

The  chart  of  accounts  for  this  company  is  arranged  in  graphic 
form  on  the  next  page  together  with  a  typewritten  form,  in  order 
that  we  may  have  before  us  a  concrete  example  of  both  methods 
of  presentation. 

LIST  OF  GENERAL  LEDGER  ACCOUNTS 

CUBRENT  ASSETS 

A-l     Cash  in  Banks 
A-2     Imprest  Fund 
A-3     Garage  Change  Fund 
A-4     Notes  Receivable 
A-5     Accounts  Receivable 

( a )  General 

(b)  Garage 

A-7     Deposits  with  Manufacturers 

A-16  Interest  Accrued  on  Notes  Receivable 

TRADING  AND  WORKING  ASSETS 
B-l     New  Cars 
B-2     New  Trucks 
B-3     Second-hand  Cars 
B-4     Demonstration  Cars 
B-5     Parts  and  Supplies 
B-6     Car  Equipment 
B-7    Tires 

B-8     Gasoline  and  Oil 
B-9     Sundry  Purchases— Garage 
B-10  Accrued  Labor  on  Repairs 
B-ll  Tools  and  Supplies  on  Hand 
B-12  Insurance  Premiums  Prepaid 
B-l 3  Taxes  Prepaid 
B-14  Freight  Prepaid  on  Cars 
B-l 7  Exchange  Checks 

FIXED  ASSETS 

C-l     Garage  Building  and  Equipment 
C-2     Repair  Shop  Equipment 
C-3     Office  Furniture  and  Fixtures 
C-10  Livery  and  Service  Cars 


84        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


CHART  OF  GENERAL 


A55ET5 

LIABILITIES 

A 

CUHREMT 

B 

TRADIMGWUJ 
WORKING 

C 
FIXED 

D 

GOOD  WILL  AMD 
IrivcsTnY3 

E 

F 

FOUNDED  DEBT 

G 

RESERVES  . 

1 

Cash  in  Bank 

Mew  Cars 

Garage  Bldg 
&  Cquipm't 

1 

Deprec'n  of 
Garage  Bldg 
&  Equipment 

2 

mprest  fund 

Mew  Trucks 

Repair  Shop 
Equipment 

2 

Deprecn  of 
Repair  Shop 
ftEequipm't 

3 

GarageChange 

Fund 

Second  Hond 
Cars 

Office  Furn. 
Cf  Futures 

3 

Deprec'n  of 
OfficeFunx 

&  Fixtures 

4 

Notes  Rec. 

Demonstro  • 
tion  Cars 

4 

Hoteb  Fhy 

So. 
5b 

Actts  Rec 
General 
Garage 

Parts  and 

Supplies 

Good  Will 
and  Contracts 

5 

Audited 
Vouchers 

Payable 

Loss  on 

Bod  Accounts 

6 

Cor 

Equipment 

6 

Packford 
Motor  Co 

7 

Deposits  with 
lanufatturers 

Tires 

7 

Customer's 
Deposits 

6 

Gasoline 
and  Oil 

e 

Dividends 

9 

Sundry 
Purchases 
Garage 

9 

10 

Ace  Labor 
Cn  Repairs 

Uviry   und 

Servic.(  (  jr.-i 

10 

Wages  Ace. 

Deprecn-  1  of 
Livery  and 
Service  Car 

II 

Tools 
and  Supplies 
en  Hond 

II 

ia 

Insurance 
Prems.  Prep 

12 

13 

ToAtsPrep. 

13 

To*es  Ace 

14 

Freight  Frefi 

14 

15 

15 

Int.  Ace  on 
Motes  Rec 

16 

Int.  Ace  on 
Motes  Pay 

17 

Exchange 
ChccKs 

17 

ie 

16 

19 

19 

PACKFORD  AUTO  SALES  COMPANY 


85 


LEDGER  ACCOUNTS 


INCOME  AND  EXPENSE: 

H 

CAPITAL 

j 

SALES 

K 

COST  OF  SALES 

L     - 

SELLING 

n 

GEMCRAL 
ADMIN'ST'VE 

n 

GARAO& 
EXPENSES 

P 
REPAIR 
DEPARTMENT 

ExPEMse 

Capitol  Stoik 

1 

New  Cats 

Mew  Cars 

Salesmen's 
Salaries 

Officers 
Salaries 

Labor 

Direci 
Labor 

1 

Surplus 

2 

Mew  Trucks 

Mew  Trucks 

Commissions 

Telephone 
&  Telegraph 

Superinten- 
dence 

Indirect 
Lobof 

£ 

Prof  it  a  Loss 

3 

Second  Hand 
Cars 

Second  Hand 
Cars 

Advertising 

Fbstage 

3 

4 

DemonstratY) 
Cars 

flernonstrot'n 
Cors 

HcmoiistrotVi 
Expense 

Entertainment 

4 

5 

Parts  and 
Supplies 

Ports  ond 
Supplies 

Loss  on 
Bad  Accounts 

5 

6 

Car  Equiprrft 

Car  Equipm't 

Salesmen's 
Traveling 
Expenses 

Traveling 
Expense 

6 

7 

Tires 

Tires 

Salesroom 
Expense 

7 

6 

Gosolme  and 
Oil  -  Garage 

Gasoline  and 
Oil  -Garage 

Htat  &  Light 

Power,  Heat 
and   Light 

Power 

6 

3 

•Jonury  .Soles 
Garage 

-Sundry  Soles 
Garage 

Rent 

lamtenance 

9 

10 

Repair  Soles 

Repair  Sales 

Service  Car 
Expense 

10 

II 

Storage 
Garage 

Office 
Supplies 
Csed 

Tools  ond 
Supplies 
Used 

Tools  and 
Supplies 
Used 

II 

12 

Washing  and 
Polishing 
Garage 

Insurance  on 
StocK  Cars 

12 

13 

Livery 
Garage 

Free  Repairs 
and 
^placements 

Office  Clerks 
Salaries 

Salaries  of 
Livery 

Chauffeurs 

13 

H 

height  Soles 

freight  So)es 

FYt.ond  E*p. 
on  Ports  and 
Equipment 

14 

15 

bunclry 
Garage 
Revenue 

Miscellaneous 
Selling 
Expense 

Miscellaneous 
Ofrice 
Expense 

riiscellaneeus 
Oarage 
Expense 

riiscelloneous 
Repair  Uept. 
Expense 

15 

1C- 

Interest  Rec. 

Interest  Paid 

16 

17 

Cash  Disct 
on  Purchase 

Cosh  DiSCt 
on  Sales 

17 

16 

Miscellaneous 
Income 

Adjustment 
of  Rss  tor 

DgerecM'n 

16 

19 

19 

S<>        RY8TEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

GOODWILL  AND  INVESTMENTS 

D-o  Goodwill  and  Contracts 

CURRENT  LIABILITIES 

E-4     Notes  Payable 

E-5     Audited  Vouchers  Payable 

E-6     Packford  Motor  Company 

E-7     Customers'  Deposits 

E-8     Dividends 

E-10  Wages  Accrued 

E-13  Taxes  Accrued 

E-16  Interest  Accrued  on  Notes  Payable 

FUNDED  DEBT,  MORTGAGES,  ETC. 
F-l 
F-2 
F-3 

RESERVES 

G-l     Reserve  for  Depreciation  of  Garage  Building  and   Equipment 

G-2     Reserve  for  Depreciation  of  Repair  Shop  Equipment 

G-3     Reserve  for  Depreciation  of  Office  Furniture    and    Fixtures 

G-5     Reserve  for  Loss  on  Bad  Accounts 

G-10  Reserve  for  Depreciation  of  Livery  and  Service  Cars 

CAPITAL  ACCOUNTS 

H-l     Capital  Stock 

H-2     Surplus 

H-3     Profit  and  Loss 

SALES  ACCOUNTS 

J-l     New  Cars 

J-2     New  Trucks 

J-3     Second-hand  Cars 

J-4     Demonstration  Cars 

J-5     Parts  and  Supplies 

J-6     Car  Equipment 

J-7     Tires 

J-8     Gasoline  and  Oil — Garage 

J  !)     Sundry  Sales — Garage 

J-10  Repair  Sales 

J-ll  Storage — Garage 

J-l 2  Washing  and  Polishing — Garage 

J-l 3  Livery — Garage 

J-14  Freight  Sales 

J-15  Sundry  Garage  Revenue 

J-l 6  Interest  Received 

J-l 7  Cash  Discount  on  Purchases 

J-l 8  Miscellaneous  Income 

COST  OF  SALES 

K-l     New  Cars 

K-2     New  Trucks 

K-3     Second-hand  Cars 

K-4     Demonstration  Cars 

K-5     Parts  and  Supplies 

K-6     Car  Equipment 

K-7     Tires 

K-8     Gasoline  and  Oil — Garage 

K-9     Sundry  Sales — Garage 

K-10  Repair  Sales 

K-14  Freight  Sales 


PACKFORD  AUTO  SALES  COMPANY  87 

SELLING  EXPENSES 

L-l     Salesmen's   Salaries 

L-2     Commissions 

L-3     Advertising 

L-4     Demonstration  P^xpense 

L-6     Salesmen's  Traveling  Expenses 

L-7     Salesroom  Expense 

L-l 2  Insurance  on  Stock  Cars 

L-13  Free  Repairs  and   Replacements 

L-14  Freight  and  Express  on  Parts  and  Equipment 

L-15  Miscellaneous  Selling  Expense 

GENERAL  ADMINISTRATIVE  EXPENSES 

M-l  Officers'  Salaries 

M-2  Telephone  and  Telegraph 

M-3  Postage 

M-4  Entertainment 

M-5  Loss  on  Bad  Accounts 

M-6  Traveling  Expense 

M-8  Heat  and  Light 

M-9  Rent 

M-10  Service  Car  Expense 

M-ll  Office  Supplies  Used 

M-13  Office  Clerks'  Salaries 

M-l 5  Miscellaneous  Office  Expense 

M-16  Interest  Paid 

M-l 7  Cash  Discounts  on  Sales 

M-18  Adjustment  of  Reserve  for  Depreciation 

GARAGE  EXPENSES 
N-l     Labor 
N-2     Superintendence 
N-8     Power,  Heat  and  Light 
N-9     Maintenance 
N-ll  Tools  and  Supplies  Used 
N-l 3  Salaries  of  Livery  Chauffeurs 
N-l 5  Miscellaneous  Garage  Expense 

REPAIR  DEPARTMENT  EXPENSES 
P-l     Direct  Labor 
P-2     Indirect  Labor 
P-8     Power 

P-ll  Tools  and  Supplies  Used 
P-15  Miscellaneous  Repair  Department  Expense 


CHAPTER  IX 

ASSETS  AND  LIABILITIES 

The  asset  accounts  in  this  particular  system  are  arranged  in 
four  definite  groups,  viz.: 

Current  Assets 

Trading  and  Working  Assets 

Fixed  Assets 

Goodwill  and  Investments 

The  liabilities  are  grouped  under  main  headings,  classified  as : 

Current 

Funded  Debt  and  Mortgages 

Reserves 

Capital 

This  classification  or  arrangement  has  been  found  to  be  very 
satisfactory  for  garage  and  automobile  sales  companies  and 
illustrates  one  of  the  variations  which  must  be  made  from 
standard  in  order  to  meet  the  requirements  of  a  particular 
business.  In  systems  following,  other  classifications  will  be  illus- 
trated and  discussed. 

It  is  intended  to  summarize  in  brief  the  entries  to  and  the 
operation  of  each  of  the  accounts  shown  in  the  chart  illustrated 
in  graphic  form  on  page  84.  Those  which  are  of  the  ordinary 
type  and  with  no  special  features  are  touched  upon  briefly. 
Some  of  those  peculiar  to  this  line  of  business  are  explained 
in  full. 

Account  A- 1  Cash  in  Banks. — Debit  with  all  money  on  de- 
posit at  the  time  of  opening  the  account;  at  the  end  of  each 
month  with  the  total  cash  received  during  the  month  as  shown 
by  the  footing  of  the  "amount  of  remittance"  column  in  the 
cash  receipts  book. 

Credit  at  the  close  of  each  month  with  the  total  of  the  check 
payments  for  the  month  as  shown  by  the  footings  of  the  "amount 
of  check"  column  in  the  check  register. 

The  balance  represents  the  cash  on  deposit  in  the  banks.  This 
balance  should,  of  course,  agree  with  the  sum  of  the  balances 

88 


ASSETS  AND  LIABILITIES  89 

shown  in  the  bank  balance  columns  in  the  check  register  which 
should  be  reconciled  with  the  statement  received  from  the  bank. 

Account  A-2  Imprest  Fund. — Debit  for  the  amount  of 
check  drawn  to  establish  the  fund ;  if  the  fund  is  increased,  with 
the  amount  of  such  increase. 

Credit  if  the  fund  is  decreased,  with  the  amount  of  such 
decrease. 

The  balance  represents  the  amount  of  the  fund. 

Account  A-3  Garage  Change  Fund. — This  fund  is  similar 
to,  and  is  kept  in  the  same  way  as  the  imprest  fund,  account  A-2. 

Account  A-4  Notes  Receivable. — Debit  for  the  amount  of 
notes  receivable  taken  from  the  customers  as  shown  by  the  entries 
in  the  journal. 

Credit  for  payments  received  on  account  of  notes  due  from 
customers  as  shown  by  an  analysis  of  the  sundry  credits  column 
in  the  cash  receipts  book. 

The  balance  represents  the  amount  of  notes  receivable  out- 
standing due  from  customers. 

Account  A-5  (a)  Accounts  Receivable  General. — Debit  at 
the  time  the  system  is  installed  with  the  total  of  accounts  re- 
ceivable outstanding;  at  the  end  of  each  month  with  the  foot- 
ing of  the  corresponding  column  in  the  sales  and  cost  journal ; 
with  any  other  debits  which  there  may  be  to  this  account  in 
other  books  of  original  entry. 

Credit  at  the  end  of  each  month  with  the  footing  of  the 
corresponding  column  in  the  cash  receipts  book ;  with  the  foot- 
ing of  the  corresponding  column  in  the  sales  returns  and  allow- 
ances book ;  with  any  credit  there  may  be  to  this  account  in 
the  voucher  register ;  with  any  other  credits  which  there  may  be 
to  this  account  in  other  books  of  original  entry. 

Balance  reprasents  the  amounts  due  from  general  customers. 

Account  A-5  (b)  Accounts  Receivable  Garage. — This  ac- 
count is  operated  in  the  same  way  as  A-5  (a). 

Account  A-y  Deposits  with  Manufacturers. — Debit  with 
deposits  made  by  the  Packford  Auto  Sales  Company  with  the 
Packford  Motor  Company  as  a  guarantee. 

Credit  with  deposits  returned  by  the  manufacturers. 

The  balance  is  a  current  asset  and  represents  the  amount 
of  cash  on  deposit  with  the  manufacturers. 

Account  A-i6     Interest   Accrued   on   Notes   Receivable. — 


90        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Debit  at  the  end  of  the  first  month  with  the  amount  of  interest 
accrued  on  notes  receivable  on  hand.  At  the  close  of  each 
successive  month  debit  or  credit  the  account,  as  the  case  may 
be,  with  such  an  amount  as  will  cause  the  account  to  show 
the  proper  balance ;  the  offsetting  debit  or  credit  for  these  entries 
is  account  J-16. 

The  balance  represents  the  interest  accrued  to  date  and  unpaid 
on  notes  receivable. 

Account  B-i  New  Cars. — Debit  for  the  cost  of  new  cars  on 
hand  when  the  account  is  opened;  at  the  end  of  each  month 
for  the  cost  of  new  cars  purchased  during  the  month  as  shown 
by  the  footing  of  the  corresponding  column  in  the  voucher 
register ;  for  the  cost  -of  any  items  of  equipment  which  have 
been  added  to  the  cars  which  increase  the  value  as  shown  by 
information  taken  from  the  sundry  debits  column  of  the  sales 
journal. 

Credit  at  the  end  of  each  month  for  the  cost  of  new  cars 
sold  as  shown  by  the  footing  of  the  corresponding  column  in 
the  cost  journal.  At  the  same  time,  debit  cost  of  new  cars 
sold  (K-l). 

The  balance  represents  the  cost  of  new  cars  on  hand. 

Account  B-2  New  Trucks. — Represents  new  trucks  on  hand 
and  is  operated  in  the  same  way  as  account  B-l,  the  informa- 
tion being  taken  from  the  same  books  of  original  entry. 

Account  6-3  Second-Hand  Cars. — Debit  for  the  cost  of 
second-hand  cars  on  hand  at  the  time  the  account  is  opened; 
at  the  end  of  each  month  for  the  cost  of  second-hand  cars 
acquired  during  the  month  as  shown  by  the  footing  of  the 
corresponding  column  in  the  voucher  register;  for  the  cost  of 
demonstration  cars  transferred  to  the  account  as  shown  by  the 
journal  entry  making  such  transfer;  for  the  selling-  price  of 
any  equipment  added  to  the  cars  which  increases  their  value 
as  shown  by  the  information  in  the  sundry  debits  column  of 
the  sales  and  cost  journal ;  for  the  cost  of  repairs  to  second- 
hand cars  as  shown  by  the  sales  and  cost  journal. 

Credit  at  the  end  of  each  month  for  the  total  cost  of  second- 
hand cars  sold  as  shown  by  the  footing  of  the  corresponding 
column  in  the  cost  journal.  At  the  same  time,  debit  cost  of 
second-hand  cars  sold  (K-3). 

The  balance  represents  the  cost  of  second-hand  cars  on  hand. 


ASSETS  AND  LIABILITIES  01 

Account  B-4  Demonstration  Cars. — This  account  is  han- 
dled the  same  as  account  B-3,  except  that  it  is  charged  for  the 
freight  on  the  cars  which  are  transferred  to  the  demonstration 
account. 

Credits  are  from  the  same  source  as  those  for  second-hand 
cars,  account  B-3. 

The  balance  represents  the  cost  of  demonstration  cars  on 
hand. 

Account  B-5  Parts  and  Supplies. — Debit  for  all  purchases 
of  parts  and  supplies  during  the  month  as  shown  by  the  foot- 
ing of  the  corresponding  column  in  the  voucher  register. 

Credit  for  the  cost  of  parts  and  supplies  sold  as  shown  by 
the  corresponding  column  in  the  cost  journal;  for  the  cost  of 
parts  and  supplies  delivered  to  the  garage  on  requisition  as 
shown  by  the  journal  entry  made  from  the  summary  of  such 
requisitions.  At  the  same  time,  debit  account  B-9. 

Balance  represents  the  cost  of  parts  and  supplies  on  hand. 
This  account  is  brought  into  agreement  with  the  physical  in- 
ventory taken  at  the  close  of  each  year,  the  offsetting  debit  or 
credit  necessary  for  this  adjustment  being  to  account  H-3. 

Account  B-6  Car  Equipment. — This  account  is  operated  in 
the  same  way  as  account  B-5,  the  information  being  taken  from 
the  same  sources. 

Account  B-7  Tires. — This  account  covers  the  item  of  tires 
and  is  operated  the  same  as  account  B-5,  the  information  being 
taken  from  the  same  sources. 

Account  B-8  Gasoline  and  Oil. — Debit  for  purchases  dur- 
ing the  month  as  shown  by  the  footing  of  the  corresponding  col- 
umn in  the  voucher  register. 

Credit  at  the  end  of  the  month  with  the  cost  of  gasoline  and 
oil  sold  as  determined  by  deducting  the  amount  on  hand  as 
shown  by  a  physical  inventory  from  the  debit  balance  of  the 
account,  at  the  same  time  debiting  K-8. 

Balance  represents  cost  of  gasoline  and  oil  on  hand. 

Account  B-g  Sundry  Purchases  Garage. — Debit  for  the 
parts  and  supplies  transferred  from  the  stockroom  to  the  garage 
on  requisition  as  shown  by  the  entry,  crediting  account  B-5, 
made  from  the  summary  of  requisitions. 

If  there  have  been  purchases  especially  for  the  garage  as 
shown  by  the  analysis  of  the  sundry  debit  column  in  the 


92        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

voucher  register,  these  items  should  be  posted  to  the  debit  of 
this  account. 

Credit  for  the  cost  of  parts  and  supplies  used,  which  is 
determined  by  deducting  the  amount  as  shown  by  the  physical 
inventory  of  parts  and  supplies  on  hand  from  the  debit  balance 
of  this  account,  at  the  same  time  debiting  account  K-9. 

Balance  represents  parts  and  supplies  on  hand  at  the  garage. 

Account  B-io  Accrued  Labor  on  Repairs. — Debit  for  the 
amount  obtained  by  summarizing  the  labor  section  on  the  repair 
tags  attached  to  cars  still  in  process  of  repair,  credit  K-l. 

The  account  is  debited  or  credited  to  bring  it  into  balance 
with  the  summary  detailed  above  so  that  the  balance  will  repre- 
sent the  amount  of  labor  accrued  on  cars,  the  repairs  on  which 
are  still  uncompleted. 

Account  B-n  Tools  and  Supplies  on  Hand. — Debit  for  the 
cost  of  tools  and  supplies  purchased  as  shown  by  the  sundry 
debits  column  in  the  voucher  register. 

At  the  beginning  of  the  year  the  total  cost  of  tools  and  sup- 
plies for  the  year  is  estimated,  and  at  the  end  of  each  month  a 
credit  to  this  account  is  made  for  one-twelfth  of  the  estimated 
amount;  the  offsetting  debit  being  to  M-ll,  N-ll  and  P-ll. 

At  the  end  of  the  year  a  physical  inventory  is  taken  and  the 
credit  in  the  month  of  December  is  of  such  an  amount  as  will 
agree  the  balance  of  the  account  with  the  inventory. 

Account  B-I2  Insurance  Premiums  Prepaid. — Debit  with 
the  amount  of  insurance  premiums  paid  during  the  month  as 
shown  by  the  sundry  debits  column  in  the  voucher  register. 

Credit  for  the  amount  of  insurance  expired  during  the  month 
as  shown  by  the  footing  of  the  corresponding  month's  column  in 
the  insurance  register. 

Balance  represents  the  amount  of  insurance  premiums  prepaid. 

Account  B-I3  Taxes  Prepaid. — During  the  period  from 
April  1  to  October  1  the  various  expense  accounts  are  charged 
and  account  E-13  is  credited  for  one-twelfth  of  the  estimated 
amount  of  taxes  for  the  year;  from  October  1  to  April  1  the 
same  expense  accounts  are  charged,  but  the  offsetting  credit  is  to 
account  B-13. 

At  October  1,  when  the  taxes  are  paid,  account  B-13  is  debited 
for  taxes  prepaid  for  the  balance  of  the  year,  at  which  time 


AStSETkl  AND  LIABILITIES  93 

account  E-13  is  charged  with  such  an  amount  as  will  balance 
the  account. 

From  October  1  to  April  1  the  various  expense  accounts  are 
charged  and  this  account  credited  for  one-twelfth  of  the  taxes 
for  the  year,  so  that  at  April  1  the  account  will  be  in  balance. 

The  balance  represents  the  taxes  prepaid.  The  distribution 
of  this  account  is  indicated  in  monthly  adjusting  entry  No.  7. 

Account  B-i4  Freight  Prepaid  on  Cars. — Debit  for  the 
freight  paid  on  new  cars  acquired  as  shown  by  the  corresponding 
column  in  the  voucher  register. 

Credit  for  freight  on  new  cars  sold  as  shown  by  the  cor- 
responding column  in  the  cost  journal. 

Balance  represents  the  freight  on  new  cars  which  are  on  hand 
to  be  sold. 

Account  B-iy  Exchange  Checks. — This  account  is  charged 
and  credited  for  the  same  amount  at  the  time  funds  are  trans- 
ferred from  one  bank  to  another,  and  is  merely  a  transit  or 
wash  account  and  does  not  appear  in  the  trial  balance. 

Account  C-i  Garage  Building  and  Equipment. — Debit  for 
the  cost  of  the  garage  building  and  equipment  and  for  such 
additions  as  may  be  made  as  shown  by  the  voucher  register. 

Credit  for  items  sold  or  disposed  of. 

Balance  represents  the  cost  of  garage  building  and  equipment. 

Account  C-2  Repair  Shop  Equipment. — Operated  in  the 
same  manner  as  account  C-l  except  that  it  represents  repair 
shop  equipment. 

Account  C-3  Office  Furniture  and  Fixtures. — This  account 
covers  the  office  furniture  and  fixtures  and  is  operated  the  same 
as  account  C-2. 

in  the  above  C  accounts  reference  should  be  made  to  the 
analysis  of  fixed  assets  record,  form  30,  and  the  explanation  of 
the  form. 

Account  C-4  Lively  Cars. — This  account  is  operated  in  the 
same  way  as  account  B-3  and  the  source  of  the  debits  and 
credits  is  the  same. 

The  balance  represents  the  cast  of  cars  assigned  to  livery 
service. 

Account  D-5  Goodwill  and  Contracts. — This  account  does 
not  differ  materially  from  the  ordinary  goodwill  account,  except 
that  in  this  particular  case  the  cost  of  obtaining  contracts  with 


94        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

the  manufacturers  for  handling  their  cars  is  charged  directly 
to  this  account  and  apportioned  over  the  life  of  the  contract. 

Account  E-4  Notes  Payable. — This  is  the  ordinary  notes 
payable  account  and  the  entries  are  taken  from  the  cash  receipts 
and  cash  disbursements  records,  and,  in  some  cases,  from  the 
journal. 

The  balance  represents  the  amount  of  notes  payable  out- 
standing. 

Account  E-5  Audited  Vouchers  Payable. — Debit  with  the 
footing  of  the  corresponding  column  in  the  check  register  (not 
to  include  payments  to  Packford  Motor  Company). 

Credit  from  the  corresponding  column  in  the  voucher  register. 
Debit  or  credit  from  the  journal  for  any  entries  affecting  the 
liability  to  vendors. 

Balance  represents  the  accounts  payable  outstanding. 

Account  E-6  Packford  Motor  Company. — This  account  is 
operated  in  the  same  way  as  account  E-5  except  that  it  segre- 
gates the  account  with  the  Packford  Motor  Company  from  the 
other  accounts  payable. 

Account  E-7  Customers'  Deposits. — When  a  customer 
takes  delivery  of  a  car  which  he  has  purchased  and  on  which 
he  has  been  required  to  make  a  deposit  and  pays  the  balance 
of  the  purchase  price,  account  E-7  is  charged,  and  the  cus- 
tomer's account  (A-5)  credited,  for  the  amount  of  his  deposit. 
If  the  deposit  is  forfeited,  account  E-7  is  charged,  and  miscel- 
laneous income,  account  J-18,  credited  for  the  amount  forfeited. 

When  the  customer  purchases  a  car  he  is  required  to  make  a 
deposit  as  an  evidence  of  good  faith.  This  deposit  is  credited 
to  account  E-7. 

Account  E-8  Dividends. — This  is  an  ordinary  dividend  ac- 
count. 

Debit  for  dividends  paid  to  the  stockholders  in  accordance 
with  the  declaration. 

Credit  for  the  amount  of  dividends  declared  as  shown  by  the 
records. 

The  balance  represents  the  amount  of  dividends  declared  and 
payable  to  stockholders. 

Account  E-io  Wages  Accrued. — The  account  is  used  at  the 
close  of  each  month  to  bring  on  the  wages  accrued  from  the 
last  pay  day  to  the  close  of  the  month.  The  account  is  ad- 


ASSETS  AND  LIABILITIES  95 

justed  so  that  the  balance  will  represent  the  amount  accrued 
and  unpaid  at  the  end  of  each  month,  but  is  not  closed  by  a 
reversing  entry  at  the  beginning  of  the  next  month. 

Account  E-i3  Taxes  Accrued. — The  explanation  of  the 
operation  of  this  account  has  been  given  in  connection  with 
taxes  prepaid,  account  B-13. 

Account  E-i6  Interest  Accrued  on  Notes  Payable. — This 
account  is  used  at  the  close  of  each  month  to  bring  on  the 
interest  accrued  and  unpaid  on  notes  payable  to  date.  An 
entry  is  made  in  the  journal  to  adjust  the  balance  of  this  ac- 
count so  as  to  represent  the  amount  of  interest  accrued  on 
notes  outstanding  at  the  close  of  the  month. 

G  Accounts. — All  of  the  G  accounts  are  the  ordinary  reserves 
for  depreciation  and  losses,  and  no  detailed  explanation  seems 
necessary  in  order  to  understand  their  operation.  The  balances 
are,  or  should  be,  all  credits,  the  result  of  the  monthly  adjust- 
ing entries  bringing  on  and  charging  to  expenses  of  the  month 
the  depreciation  and  estimated  losses  for  the  period. 

H  Accounts. — The  H  group  of  accounts  are  the  ordinary  cap- 
ital, surplus  and  profit  and  loss  accounts,  and  no  detailed  expla- 
nation is  necessary. 

The  capital  stock  account  represents  the  stock  of  the  cor- 
poration outstanding  at  the  close  of  any  period.  The  surplus 
represents  the  accumulated  undistributed  earnings  at  the  close 
of  a  period,  and  the  profit  and  loss  account  represents  the  profit 
or  loss  during  the  period. 

It  will  be  noted  that  the  asset  and  liability  accounts  included 
in  the  chart  under  letters  A  to  H  inclusive  are  arranged  in  the 
same  relative  order  as  the  monthly  balance  sheet,  form  35. 

At  the  close  of  each  month  a  trial  balance  of  the  general 
ledger  is  taken,  from  which  form  35  is  prepared.  The  method 
of  taking  this  trial  balance  and  preparing  the  form  is  described 
in  Chapter  VIII  covering  use  of  the  forms.  The  detail  work  in 
making  up  this  form  may  be  summarized  as  follows: 

The  previous  year's  figures  are  taken  from  the  monthly  bal- 
ance sheet  which  was  made  up  in  the  prior  year  and  in  all  prob- 
ability have  been  inserted  before  the  close  of  the  month. 

The  current  assets  on  the  balance  sheet  are  taken  from  the 
balances  of  the  asset  accounts,  A-l,  2,  3,  4,  5,  7  and  16.  The 
trading  and  working  assets  are  the  balances  of  accounts  B-]  to 


96        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

14,  inclusive.  The  fixed  assets  are  the  balances  of  accounts  C-l, 
2,  3  and  10,  and  goodwill  is  the  balance  of  account  D-5. 

The  current  liabilities  are  represented  by  the  balances  of 
accounts  E-4,  5,  6,  7,  8,  10,  13  and  16 ;  the  reserves  by  accounts 
G-l,  2,  3,  5  and  10;  and  the  capital  group  by  the  balances  of 
accounts  H-l,  2  and  3. 

At  the  close  of  each  month,  the  various  operating  accounts  are 
not  closed  to  profit  and  loss,  therefore,  the  figure  inserted  on 
the  monthly  balance  sheet  as  profit  or  loss  would  be  the  differ- 
ence between  the  debits  and  credits  in  form  37  rather  than  the 
balance  of  account  H-3. 


CHAPTER  X 

INCOME  ACCOUNTS 

There  are  no  sales  returns  and  allowances  accounts  provided 
in  the  general  ledger,  all  returns  and  allowances  being  charged 
directly  to  the  sales  accounts. 

Account  J-i  New  Cars. — Credit  at  the  end  of  each  month 
with  the  total  sales  of  new  cars  as  shown  by  the  footing  of  the 
corresponding  column  in  the  sales  journal. 

Debit  for  any  allowances  made  to  customers  on  new  cars  sold 
as  shown  by  the  journal  entries,  and  when  the  books  are  closed 
with  the  balance  of  account  K-l. 

The  balance  represents  the  gross  profit  on  sales  of  new  cars, 
and  is  closed  into  profit  and  loss. 
Account  J-2     New  Trucks 
Account  J-3     Second-Hand  Cars 
Account  J-4     Demonstration  Cars 

Are  all  handled  in  the  same  way,  and  receive  debits  and 
credits  from  the  same  sources  as  account  J-l. 

The  balance  in  each  case  is  the  gross  profit  or  loss  from  each 
class  of  sales. 

Account  J-5  Parts  and  Supplies. — Credit  for  the  parts  and 
supplies  sold  as  shown  by  the  footing  of  the  corresponding 
column  in  the  sales  journal. 

Debit  with  the  footing  of  the  corresponding  column  in  the 
sales  returns  and  allowances  book,  and  when  the  books  are 
closed  with  the  balance  of  account  K-5. 

Balance  represents  gross  profit  or  loss  on  parts  and  supplies 
sold. 

Account  J-6       Car  Equipment 
Account  J-y       Tires 
Account  J-io     Repair  Sales 
Account  J-i4     Freight  Sales 

Are  all  operated  in  the  same  way,  and  receive  debits  and 
credits  from  the  same  source  as  account  J-5  and  the  balances 
represent  gross  profit  or  loss  for  each  class  of  sales. 

97 


98        SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Account  J-8  Gasoline  and  Oil — Garage. — Credit  for  the 
footing  of  the  corresponding  column  in  the  sales  journal  (charge 
sales  made  at  the  office)  ;  for  the  footing  of  the  corresponding 
column  in  the  cash  received  book  (cash  sales)  ;  for  the  total  of 
the  corresponding  column  on  the  summarized  analysis  of  garage 
service  sheets  (garage  sales). 

Debit  for  any  allowances  which  have  been  made  to  customers 
as  shown  by  either  the  sales  returns  and  allowances  book  or  by 
the  journal  entries,  and  when  the  books  are  closed  with  the 
balance  of  account  K-8. 

Balance  represents  gross  profit  or  loss  on  sales  of  gasoline 
and  oil. 

Account  J-g       Sundry  Sales — Garage 
Account  J-n     Storage — Garage 
Account  J-I2     Washing  and  Polishing — Garage 
Account  J-I3     Livery — Garage 
Account  J-i5     Sundry  Garage  Revenue 

The  above  accounts  all  represent  garage  income. 

Credit  with  the  footings  of  the  corresponding  columns  in  the 
summarized  analysis  of  garage  service  sheets. 

Debit  for  any  allowance  made  on  account  of  these  sales,  and 
when  the  books  are  closed  with  the  balances  of  the  corresponding 
K  accounts. 

Balance  of  each  account  represents  the  gross  profit  or  loss 
from  sales. 

At  the  close  of  each  month  after  the  trial  balance  of  the 
general  ledger  has  been  taken,  a  trading  and  profit  and  loss 
statement,  form  36,  is  made  up. 

The  method  of  arriving  at  figures  for  the  current  month  has 
already  been  described  on  page  76  in  connection  with  the 
preparation  of  a  trial  balance  in  the  description  of  the  forms. 
The  balances  of  the  J  accounts,  representing  sales  and  income, 
are  transferred  to  the  right-hand  page  of  form  36  opposite 
their  proper  headings.  By  having  the  chart,  page  84,  at  hand 
when  the  form  is  referred  to,  the  method  of  preparing  the  in- 
come side  of  the  statement  is  clearly  evident  without  detailed 
explanation. 


CHAPTER  XI 

EXPENSE  ACCOUNTS 
COSTS— K  ACCOUNTS 

These  accounts  are  set  up  by  posting  as  debits  the  correspond- 
ing columns  in  the  sales  and  cost  journal.  They  are  credited 
from  the  sales  returns  and  allowances  book  for  the  cost  of  such 
items  as  have  been  returned  by  the  customers.  The  balance 
of  each,  represents  the  net  cost  of  sales,  and  is  closed  into  the 
corresponding  sales  account  under  the  J  classification. 

SELLING  EXPENSES— L  ACCOUNTS 

These  accounts  are  all  expenses  incident  to  sales  and  are 
charged  with  the  various  expenditures  as  shown  by  the  voucher 
register  or  by  journal  entries  transferring  expenses.  Nearly 
all  of  the  debits  are  taken  from  special  columns  in  the  voucher 
register,  and  it  does  not  seem  necessary  to  describe  in  detail  the 
operation  of  each  account. 

In  the  case  of  demonstration  expense,  account  L-4,  it  is  charged 
with  the  wages  of  operators,  gasoline  and  oil  used,  repairs,  de- 
preciation, insurance,  registration,  etc.,  and  salesroom  expense, 
account  L-7,  includes  the  cost  of  decorations,  supplies  used  on 
cars,  and  a  proper  proportion  of  rent,  heat  and  light. 

GENERAL  ADMINISTRATIVE  EXPENSES— M  ACCOUNTS 

The  accounts  in  this  group  are  all  expenses  pertaining  to  the 
general  administration  of  the  business  and  receive  their  debits 
from  the  voucher  register  and  the  journal  entries. 

Account  M-5  Loss  on  Bad  Accounts. — Debit  at  the  close 
of  each  month  for  the  estimated  amount  of  losses,  the  offsetting 
credit  being  to  account  G-5. 

Account  M-8  Heat  and  Light. — Debit  for  the  entire  cost 
of  heat  and  light,  and  at  the  end  of  the  month  the  total  debits 
during  the  month  are  distributed  to  the  •  departmental  expense 
accounts;  L-7  for  selling,  M-15  for  general  and  P-15  for  the 

99 


100      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

repair  department,  on  an  arbitrary  basis  according  to  the  num- 
ber of  square  feet  occupied  by  each  department. 

Account  M-g  Rent — Is  distributed  to  the  same  expense  ac- 
counts on  the  same  basis  as  outlined  for  heat  and  light,  account 
M-8. 

Account  M-io  Service  Car  Expense — Includes  the  wages 
of  operators,  gasoline  and  oil,  repairs,  insurance  and  registra- 
tion. 

Account  M-n  Office  Supplies  Used — Is  debited  at  the 
same  time  that  account  B-ll  is  credited,  for  the  cost  of  office 
supplies  used  during  the  period  as  determined  by  means  of  a 
physical  inventory. 

Account  Mji8  Adjustment  of  Reserve  for  Depreciation. — 
Reference  should  be  made  to  the  analysis  of  fixed  assets,  form 
30,  in  order  to  clearly  understand  the  operation  of  this  account 
and  the  source  of  its  debits  and  credits. 

The  balance  is  a  sundry  gain  or  loss. 

GARAGE  EXPENSES— N  ACCOUNTS 

This  group  carries  the  expenses  of  the  garage  showing  the 
amount  expended  under  each  classification. 

The  balance  of  each  account  is  closed  into  profit  and  loss. 

REPAIR  DEPARTMENT  EXPENSES— P  ACCOUNTS 

The  expenses  of  the  repair  department  are  classified  under 
this  group  and  the  balances  are  closed  into  profit  and  loss. 

Account  P-i  Direct  Labor. — Debit  at  the  end  of  each  month 
with  the  footing  of  the  corresponding  column  in  the  voucher 
register ;  with  any  adjustments  made  in  the  case  of  repair  sales, 
credit  account  K-10. 

Credit  at  the  end  of  each  month  from  the  cost  journal  for 
the  amount  of  labor  charged  to  repairs;  for  the  amount  charged 
to  account  B-10,  representing  the  accrual  of  labor  on  repairs 
still  unfinished. 

The  balance  represents  the  cost  of  lost  time,  or  of  direct  labor 
not  charged  to  repair  work,  and  at  the  end  of  the  period  is 
closed  into  profit  and  loss. 

The  balances  of  accounts  in  the  L,  M,  N  and  P  groups  are 
transferred  to  the  expense  section  of  form  36  in  preparing  the 
monthly  statements. 


EXPENSE  ACCOUNTS  101 

During  the  year  the  balances  of  the  K  group  of  accounts  can 
be  transferred  direct  to  the  cost  section  of  form  36.  It  is 
obvious  that  it  would  be  improper  to  prepare  a  monthly  trading 
and  profit  and  loss  statement  for  December  before  all  of  the 
adjustments  had  been  made,  and  as  is  usually  the  case  the 
adjustments  naturally  are  followed  by  the  closing  of  the  books, 
and  under  the  instructions  for  the  operation  of  the  K  accounts 
it  will  be  noted  that  the  balance  is  closed  directly  to  the  J  or 
sales  and  income  accounts,  leaving  the  net  balances  to  be 
transferred  to  profit  and  loss.  With  this  in  mind,  it  is  evi- 
dent, therefore,  that  in  preparing  the  monthly  trading  and  profit 
and  loss  statement  for  December  it  will  be  necessary  to  take 
the  balances  from  both  the  K  and  J  groups  before  closing  the 
former  to  the  latter.  It  is  necessary  that .  this  be  carefully 
followed  out,  otherwise  the  comparative  figures  for  the  last 
month  in  the  year  would  be  very  seriously  disarranged. 

In  considering  the  functions  of  the  various  accounts  it  has 
not  been  considered  necessary  to  go  into  great  detail  in  con- 
nection with  those  whose  place  in  the  scheme  of  operation  is 
obvious  from  the  name  and  location  in  the  chart  of  accounts. 
While  this  system  is  not  considered  a  model,  it  does  bring  out 
many  features  which  are  not  found  in  everyday  commercial  ac- 
counting, and  seems  to  overcome  some  of  the  difficulties  which 
are  encountered  in  the  operation  of  a  business  such  as  this. 
By  referring  to  the  monthly  adjusting  entries  on  the  succeed- 
ing pages  and  tracing  these  entries  through,  no  difficulty  should 
be  experienced  in  visualizing  the  operation  of  the  entire  ac- 
counting system. 

PACKFORD  AUTO  SALES  COMPANY 
MONTHLY  ADJUSTING  ENTRIES 

1.  Cost  of  Gasoline  and  Oil  Sales   (K-8) 

To  Gasoline  and  Oil   (B-8) 

Cost  of  gasoline  and  Oil  sold — month  ending  

On  hand  first,  of  month gals,  at  — 

Add — Net  Purchases 

Deduct — On  hand  last  of  month  —        —  gals,  at  

2.  Cost  of  Sundry  Sales— Garage  (K-9) 

To  Sundry  Purchases — Garage   (B-9) 

Cost  of  sundry  sales  at  garage  for  month  ending  

On  hand  first  of  month 

Add — Net  purchases 

Deduct — On  hand  last  of  month 


102      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING- 

3.  Accrued  Labor  on  Repairs   (B-10) 
Direct  Labor  (P-l) 

To  Accrued  Labor  on  Repairs   (B-10) 
Direct  Labor   (P-l) 

To  adjust  the  balance  of  the  Accrued  Labor  on  Repairs  ac- 
count so  that  its  balance  will  represent  tb.3  accrued  labor 
on  uncompleted  repair  jobs  as  of  this  date. 

4.  Wages  Accrued  (E-10) 
Office  Clerks'  Salaries  (M-13) 
Garage  Labor  (N-l) 

Garage  Superintendence   (N-2) 
Direct  Labor    (P-l) 
Indirect  Labor   (P-2) 

To  Wages  Accrued  (E-10) 

Office  Clerks'  Salaries  (M-13) 
Garage  Labor   (N-l) 
Garage  Superintendence   (N-2) 
Direct  Labor  (P-l) 
Indirect  Labor   (P-2) 

To  adjust  the  Wages  Accrued  account  so  that  its  balance 
will  represent  the  amount  of  accrued  but  unpaid  \vages  ae 
of  this  date. 

5.  Tools  and  Supplies  Used — Garage  (N-ll) 
Tools  and  Supplies  Used — -Repair  Shop    (P-ll) 

To  Tools  and  Supplies  on  hand   (B-ll) 

One-sixth  of  the  estimated  cost  of  tools  and  supplies  used 
for  the  six  months  ending . 

G.    Insurance  on  Stock  Cars  (L-12) 

Demonstration  Expense  (L-4) 

Service  Car  Expense   (M-10) 

Maintenance — Garage  ( N-9 ) 

Miscellaneous  Garage  Expense   (N-15) 

Miscellaneous  Repair  Shop  Expense  (P-15) 

Miscellaneous  Office  Expense   (M-15) 

Miscellaneous  Selling  Expense  (L-15) 
To  Insurance  Premiums  Prepaid  (B-12) 

To  bring  onto  the  books  the  cost  of  insurance  expired  dur- 
ing the  month  as  per  the  Insurance  Register. 
Note:  Insurance  on  furniture  and  fixtures  is  divided,  65% 
to  Miscellaneous  Selling  Expenses  and  35%  to  Miscellaneous 
Office  Expenses,  in  proportion  to  the  approximate  cost  of 
furniture  and  fixtures  on  hand. 

7.  Miscellaneous  Selling  Expense  (L-15) 
Demonstration  Expense  (L-4) 
Service  Car  Expense  (M-10) 
Miscellaneous  Office  Expense  (M-15) 
Maintenance — Garage  ( N-9 ) 
Miscellaneous  Garage  Expense   (N-15) 
Miscellaneous  Repair  Shop  Expense  (P-15) 

To  Taxes  Prepaid   (B-13) 
Taxes  Accrued   (E-13) 

To  bring  onto  the  books  the  cost  of  taxes  applicable  to  the 
month. 

8.  Interest  Accrued  on  Notes  Receivable  (A-16) 
Interest  Received   (J-16) 

To  Interest  Accrued  on  Motes  Receivable  (A-16) 


EXPENSE  ACCOUNTS  103 

Interest  Received    (J-16) 

To  adjust  the  balance  of  the  Interest  Accrued  on  Notes  Re- 
ceivable account  so  that  its  balance  will  represent  the 
amount  of  interest  accrued  on  notes  receivable  as  of  this 
date. 

9.  Interest  Paid   (M-16) 

Interest  Accrued  on  Notes  Payable   (E-16) 
To  Interest  Paid    (M-16) 

Interest  Accrued  on  Notes  Payable  (E-16) 

To  adjust  the  balance  of  the  Interest  Accrued  on  Notes 
Payable  account  so  that  its  balance  will  represent  the 
amount  of  interest  accrued  on  notes  payable  as  of  this  date. 

10.  Maintenance — Garage   (N-9) 

To  Reserve  for  Depreciation  of  Garage  Building  and  Equipment  (G-l ) 
Adjustment  of  Reserve  for  Depreciation   (M-18) 

To  bring  onto  the  books  the  proper  charge  for  estimated 
depreciation  of  the  garage  building  and  equipment  for  the 
month. 

11.  Miscellaneous  Repair  Shop  Expense  (P-15) 

To  Reserve  for  Depreciation  of  Repair  Shop  Equipment   (G-2) 
Adjustment  of  Reserve  for  Depreciation  (M-18) 

To  bring  onto  the  books  the  proper  charge  for  estimated 
depreciation  of  Repair  Shop  machinery  and  equipment  for 
the  month. 

12.  Miscellaneous  Selling  Expense   (L-15) 
Miscellaneous  Office  Expense   (M-15) 

To  Reserve  for  Depreciation  of  Office  Furniture  and  Fixtures  (G-3) 
To  bring  onto  the  books  the  estimated  depreciation  of  furni- 
ture and  fixtures  for  the  month. 

Note:  The  depreciation  of  furniture  and  fixtures  is  divided, 
65%  to  Selling  Expenses  and  35%  to  Administrative  Ex- 
penses in  proportion  to  the  approximate  cost  of  furniture 
and  fixtures  on  hand. 

13.  Service  Car  Expense   (M-10) 
Miscellaneous  Garage  Expense   (N-15) 

To  Reserve  for  Depreciation  of  Livery  and  Service  Cars   (G-10) 

To  bring  onto  the  books  the  estimated  depreciation  of 
service  and  livery  cars  for  the  month. 

14.  Loss  on  Bad  Accounts   (M-5) 

To  Reserve  for  Loss  on  Bad  Accounts   (G-5) 

One-half  of  one  percent  of  the  net  charge  sales  for  the 
month. 

15.  Salesroom  Expense   (L-7) 
Miscellaneous  Office  Expense    (M-15) 

•  Miscellaneous  Repair  Department  Expense   (P-15) 
To  Heat  and  Light   (M-8) 
Rent  (M-9) 

To  distribute  heat,  light  and  rent  to  the  proper  depart- 
mental expense  accounts. 


104      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

PACKFORD  AUTO  SALES  COMPANY 
SEMI-ANNUAL  CLOSING  ENTBIES 

1.  Profit  and  Loss   (H-3) 

Tools  and  Supplies  on  Hand   (B-ll) 
To  Profit  and  Loss   (H-3) 

Tools  and  Supplies  on  Hand  (B-ll) 

To  adjust  the  balance  of  the  Tools  and  Supplies  on  Hand 
account  so  that  its  balance  will  represent  the  cost  of  tools 
and  supplies  on  hand  as  per  inventory. 

2.  Cost  of  Repair  Sales  (K-10) 

To  Repair  Department  Expenses: 

Direct  Labor— Lost  Time    (P-l) 

Indirect  Labor    (P-2) 

Power   (P-8) 

Tools  and  Supplies   (P-ll) 

Miscellaneous  Expense   (P-l 5) 

To  close   the  balances   of  the   Repair   Department   expense 

accounts  into  Cost  of  Repair  Sales. 

3.  Sales  of — 
New  Cars    ( J-l ) 
New  Trucks   (J-2) 
Second-Hand  Cars   (J-3) 
Demonstration   Cars    (J-4) 
Parts  and  Supplies   (J-5) 
Car  Equipment   (J-6) 
Tires    (J-7) 

Gasoline  and  Oil   (J-8) 
Sundry  Sales — Garage  (J-9) 
Repair  Sales    (J-10) 
Freight  Sales   (J-14) 
To  Cost  of  Sales  of— 

New  Cars   (K-l) 

New  Trucks   (K-2) 

Second-Hand  Cars    (K-3) 

Demonstration  Cars   (K-4) 

Parts  and  Supplies    (K-5) 

Car  Equipment    (K-G) 

Tires    (K-7) 

Gasoline  and  Oil   (K-8) 

Sundry  Sales— Garage   (K-9) 

Repair  Sales    (K-10) 

Freight   Sales    (K-14) 

To  close  the  cost  of  sales  for  the  period  into  the  corre- 
sponding sales  accounts. 

4.  Sales  of — 
New  Cars  (J-l) 
New  Trucks  (J-2) 
Second-Hand  Cars  (J-3) 
Demonstration  Cars  (J-4) 
Parts  and  Supplies   (J-5) 
Car  Equipment   (J-6) 
Tires   (J-7) 

Gasoline  and  Oil   (J-8) 
Sundry  Sales — Garage  (J-9) 
Repair  Sales  (J-10) 
Freight  Sales  (J-14) 


EXPENSE  ACCOUNTS  105 

To  Profit  and  Loss  (H-3) 

Sales — Second-Hand  Cars   (J-3) 
Repair  Sales   (J-10) 

To  close  the  gross  profit  on  sales  into  Profit  and  Loss. 

5.  Storage   (J-ll) 

Washing  and  Polishing   (J-12) 
Livery   (J-13) 

Sundry  Garage  Revenue  (J-15) 
To  Profit  and  Loss  (H-3) 

To  close  the  garage  revenue  for  the  period  into  Profit  and 

Loss. 

6.  Profit  and  Loss   (H-3) 

To  Garage  Expenses: 
Labor   (N-l) 
Superintendence  (N-2) 
Power,  Heat  and  Light  (N-8) 
Maintenance   (X-9) 
Tools  and  Supplies  (N-ll) 
Salaries  of  Livery  Chauffeurs   (N-13) 
Miscellaneous  Expenses   (N-15) 

To  close  the  garage  expenses  for  the  period  into  Profit  and 

Loss. 

7.  Interest  Received  (J-16) 

Cash  Discount  on  Purchases  (J-17) 
Miscellaneous  Income  (J-18) 

Adjustment  of  Reserve  for  Depreciation    (M-18) 
To  Profit  and  Loss  ( H-3 ) 

To  close  the  extraneous  income  for  the  period  into  Profit 

and  Loss. 

8.  Profit  and  Loss  (H-3) 

To  Selling  Expenses: 

Salesmen's  Salaries   (L-l) 

Commissions  (L-2) 

Advertising   (L-3) 

Demonstration  Expense    (L-4) 

Salesmen's  Traveling  Expenses   (L-6) 

Salesroom  Expense    (L-7) 

Insurance  on  Stock  Cars   (L-12) 

Free  Repairs  and  Replacements  (L-13) 

Freight  and  Express  on  Parts  and  Equipment  (L-14) 

Miscellaneous  Expense  (L-15) 

To  close  the  selling  expenses  for  the  period  into  Profit  and 

Loss. 

9.  Profit  and  Loss  (H-3) 

To  General  Administrative  Expenses: 
Officers'  Salaries   (M-l) 
Telephone  and  Telegraph   (M-2) 
Postage   (M-3) 
Entertainment   ( M-4 ) 
Traveling  Expenses    (M-6) 
Service  Car  Expense   (M-10) 
Office  Supplies  Used  (M-ll) 
Office  Clerks'  Salaries   (M-13) 
Miscellaneous  Office  Expense  (M-15) 

To  close  the  general  administrative  expenses  for  the  period 
into  Profit  and  Loss. 


106      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

10.  Profit  and  Loss  (H-3) 

To  Loss  on  Bad  Accounts  (M-5) 
Interest  Paid   (M-16) 
Cash  Discount  on  Sales  (M-17) 
Adjustment  of  Reserve  for  Depreciation  (M-18) 

To  close  the  extraneous  charges  for  the  period  into  Profit 
and  Loss. 

11.  Profit  and  Loss  (H-3) 
Surplus   (H-2) 

To  Surplus  (H-2) 

Profit  and  Loss   (H-3) 

To  close  the  net  profit  or  loss  for  the  period  into  Surplus. 


CHAPTER  XII 
THE  CENTRAL  GROCERY  COMPANY 

PERSONNEL  AND  METHOD  OF  OPERATION 

In  discussing  the  system  used  by  the  Packford  Auto  Sales 
Company  each  detail  has  been  taken  up  with  the  idea  of  form- 
ing a  groundwork  of  fundamental  principles  whereon  to  base 
our  study  of  system  work.  The  system  now  to  be  considered 
is  one  designed  for  a  wholesale  grocery  company,  the  condi- 
tions of  which,  so  far  as  transactions  are  concerned,  are  directly 
opposite  from  those  found  in  the  Packford  Auto  Sales  Company. 

In  this  business  the  number  of  items  from  which  the  in- 
come is  derived  is  large  while  the  profit  realized  on  each  item 
is  small.  With  this  in  mind,  it  is  evident  that  a  different  treat- 
ment must  be  given  to  some  of  the  records  in  order  to  avoid 
cumbering  the  general  ledger  with  a  multiplicity  of  accounts, 
which  would  involve  so  much  detail  that  monthly  statements 
could  not  be  prepared  in  time  to  be  of  any  value  to  the  execu- 
tives. 

In  the  previous  system  all  of  our  accounts  were  contained  in 
the  general  ledger.  In  this  system  we  take  up  a  new  phase 
of  accounting  where  only  controlling  accounts  are  operated  in 
the  general  ledger  and  a  series  of  analysis  sheets  are  main- 
tained, called  general  records,  wherein  the  detail  making  up 
each  control  account  is  tabulated. 

When  compared  with  the  Packford  Auto  Sales  Company  sys- 
tem, a  different  arrangement  and  classification  of  accounts  in 
the  chart  is  noted.  While  the  fundamental  principle  of  obtain- 
ing monthly  statements  from  the  trial  balance  still  maintains, 
there  is  another  arrangement  used  in  the  classification  of  assets 
and  liabilities  which  more  nearly  approaches  the  form  of  bal- 
ance sheet  approved  by  the  Federal  Reserve  Board. 

The  personnel  of  the  organization  is  composed  of  a  president, 
who  is  also  the  purchasing  agent,  and  a  treasurer,  who  attends 
to  the  usual  duties  assigned  such  an  officer,  such  as  credits, 

107 


108      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

collections  and  banking.  He  also  sees  that  the  monthly  state- 
ments are  prepared  and  attends  to  salesmen's  route  lists. 

The  office  personnel  is  made  up  of  a  chief  clerk,  who  makes 
all  postings  to  the  sales  ledgers,  checks  the  statements  and  takes 
the  sales  ledger  trial  balances;  an  order  clerk  who  figures  the 
orders;  one  billing  clerk;  a  salesmen's  record  clerk;  a  stenog. 
rapher;  and  a  bank  and  cash  records  clerk.  The  purchase  in- 
voices and  general  ledger  are  handled  by  a  chief  accountant 
who  has  three  assistants. 

The  corporation  operates,  beside  the  home  office,  a  branch  store 
which  is  in  charge  of  a  store  manager,  who  has  as  assistants  a 
chief  bookkeeper  and  four  clerks.  There  are  a  number  of 
salesmen  who  go  out  from  both  the  home  office  and  the  branch 
store,  taking  orders  from  the  customers  and  forwarding  them 
to  the  office  for  routine  handling. 

The  accounting  at  the  branch  is  conducted  on  the  same  sys- 
tem as  the  home  office,  there  being  a  control  account  in  the  home 
office  ledger  which  is  offset  by  a  control  account  in  the  branch 
ledger;  thus  for  all  practical  purposes  the  two  stores  operate 
as  individual  companies. 


CHAPTER  XIII 

THE  CENTRAL  GROCERY  COMPANY 

FORMS 

It  has  not  been  considered  necessary  to  include  a  copy  of  every 
form  used  in  the  business  as  many  of  the  general  forms,  such  as 
purchase  orders,  sales  orders,  etc.,  would  in  general  be  a  duplica- 
tion of  those  shown  in  the  Packford  set. 

There  are  included,  however,  some  of  the  forms  peculiar  to 
this  company,  and  it  is  intended  to  discuss  them  in  brief  in  order 
that  we  may  have  before  us  a  general  outline  of  the  account- 
ing system. 

FORM  No. 

100  Record  of  Collections 

111  Record  of  Audited  Invoices 

112  Record  of  Cash  Received 

113  Record  of  Checks  Drawn 

114  Summary  of  Postings  to  Accounts  Receivable 

115  Journal 

116  Private  Ledger 

117  Statement  of  Assets  and  Liabilities 

118  Statement  of  Revenues  and  Expenses 

119  Salesman's  Order 

120  Accounts  Receivable  Ledger 

121  Daily  Report  of  Sales  and  Profits 

Form  100  Sales  Ledger  Collections. — It  will  be  seen  by  re- 
ferring to  this  form  that  the  rulings  are  the  same  as  the  debit  side 
of  a  cash  book.  The  form  is  written  up  from  the  collections  as 
received  in  the  form  of  direct  remittances  from  the  customers  or 
collections  from  the  salesmen,  making  distribution  of  the  credits 
and  charges  to  the  proper  ledger  accounts. 

At  the  close  of  the  day  form  100  is  totaled  and  the  equality  of 
debits  and  credits  proved.  The  total  amount  of  cash  collected  is 
reconciled  with  the  actual  cash  received  as  entered  in  the  record 
of  cash  received,  form  112. 

Form  in  Record  of  Audited  Invoices. — This  form  does  not 
differ  materially  from  the  voucher  register  described  under  the 
preceding  system,  except  that  the  various  expenses  are  charged  in 
groups  and  a  number  column  is  provided  under  each  expense 

109 


110      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


THE  CENTRAL  GROCERY  COMPANY 


111 


112  SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

heading.  The  use  of  this  number  column  will  be  explained  in 
detail  under  the  description  of  the  accounts.  At  this  time  it  is 
necessary  to  take  only  one  illustration  to  show  the  method  of 
handling  expenses  brought  out  in  this  system. 

In  the  column  headed  ''selling  expense"  a  classification 
of  selling  expenses  is  made  up,  using  numbers  as  1,  2,  3,  etc. 
Whenever  an  item  is  entered  in  this  column,  against  the  item  is 
entered  the  number  of  its  classification  and  postings  are  made  in 
detail  from  the  column  to  the  analysis  sheet  referred  to  in  the 
preceding  chapter. 

At  the  close  of  the  month  this  form  is  footed,  the  equality  of 
debits  and  credits  proved,  and  the  total  of  each  column  posted  to 
the  corresponding  general  ledger  account.  The  miscellaneous 
column  is  posted  in  detail  to  the  proper  general  ledger  accounts. 

The  result  of  this  method  of  treatment  is  that  we  have  one 
account  in  the  general  ledger  called  selling  expense,  the  details 
of  which  are  kept  on  analysis  sheets  entirely  apart  from  the 
ledger.  This  enables  us  to  close  the  general  ledger  and  take  a 
trial  balance  practically  on  the  first  of  the  month,  leaving  the 
detail  of  bringing  up  the  analysis  until  a  later  date,  giving  ample 
time  to  perform  the  analysis  work  correctly  and  also  making 
available  for  the  executives  the  necessary  information  in  con- 
nection with  the  business  at  a  time  when  most  valuable  to  them. 

Form  112  Record  of  Cash  Received. — This  form  follows 
out  the  same  purpose  which  we  have  already  discussed,  the  only 
variation  being  in  the  headings  of  the  various  columns. 

The  bank  deposits  are  distributed  on  this  sheet  and  carried 
to  the  record  of  checks  drawn,  form  113.  At  the  close  of  the 
month  the  sheet  is  totaled,  the  equality  of  debits  and  credits 
proved,  and  the  footings  of  the  columns  posted  to  the  correspond- 
ing general  ledger  accounts.  The  general  ledger  credit  column 
and  miscellaneous  charges  column  are  posted  in  detail,  or 
analyzed  and  one  posting  made  to  the  general  ledger  accounts. 

Form  113  Record  of  Checks  Drawn. — While  this  form  is 
very  similar  to  the  same  record  used  by  the  Packford  Auto  Sales 
Company,  the  use  made  of  it  differs  quite  materially. 

As  will  be  noted  by  referring  to  the  chart  of  accounts,  page 
126,  this  company  operates  two  banks  and  it  is  necessary  to  dis- 
tribute the  checks  drawn  to  the  proper  bank.  A  sheet  of  form 

113  is  used  for  each  bank  so  that  at  tht  close  of  the  month  it  is 


THE  CENTRAL  UHOVERY  COMl'ANY 


113 


114       KYUTEM  BUILUINU  AND  CONSTRUCTIVE  ACCOUNTING 

necessary  either  to  add  the  two  bank  sheets  together  in  order  to 
obtain  the  total  credit  to  cash,  and  the  debit  to  the  various  ac- 
counts, before  making  any  postings  to  the  controlling  accounts, 
or  make  two  postings. 

As  stated  in  connection  with  form  112,  the  bank  deposit  is 
distributed  on  the  record  of  cash  received  and  carried  from  there 
directly  to  the  record  of  checks  drawn  sheet  in  the  column 
headed  "total  deposits." 

The  net  amount  of  check  column  on  this  form  is  footed  each 
day  and  the  total  of  the  day's  business  extended  in  the  total 
checks  drawn  column.  The  balance  at  the  beginning  of  the  day, 
plus  the  total  deposits  as  taken  from  the  record  of  cash  received 
and  entered  in  the  deposit  column,  minus  the  checks  drawn  as 
found  by  the  total  of  the  day's  business  in  the  net  amount  of 
check  column,  gives  the  balance  at  the  beginning  of  the  new  day. 

By  reviewing  the  two  forms  the  method  of  operation  will  be 
readily  seen  and  the  point  to  be  kept  particularly  in  mind  is  that 
at  the  close  of  the  month  either  a  summary  of  the  bank  sheets 
must  be  made  or  two  postings  to  the  control  account  are  necessary 
in  order  to  accumulate  the  debits  and  credits. 

Form  114  Summary  of  Postings  to  Accounts  Receivable. — 
This  is  a  new  form  not  used  in  the  Packford  Auto  Sales  Com- 
pany and  is  intended  to  be  a  proof  of  the  daily  postings  to  the 
several  subdivisions  of  the  accounts  receivable.  There  are  four 
separate  sales  ledgers  represented  by  one  accounts  receivable 
account  in  the  general  ledger.  This  form  is  used  in  order  to 
obtain  a  daily  balance  and  proof  of  each  sales  ledger  separately. 
The  total  of  all  sheets  should  agree  with  the  general  ledger  control 
account  covering  accounts  receivable*.  A  separate  sheet  should  be 
headed  for  each  sales  ledger. 

The  method  of  operation  is  clearly  indicated  by  the  printed 
headings.  The  column  at  the  left  of  the  sheet  with  the  numerals 
represents  the  days  of  the  month.  The  sales  book,  journal  and 
cash  book  are  summarized  to  obtain  the  charges  to  the  different 
accounts.  The  ascertained  total  is  entered  in  the  proper  columns 
and  added  horizontally  to  obtain  the  charge  for  the  day.  The 
various  credits  found  in  the  collection  books,  credit  memoranda, 
and  journal  are  summarized  by  days  and  added  across  to  obtain 
the  total  credits.  The  balance  at  the  close  of  the  previous  day, 
plus  the  total  charges,  minus  the  total  credits,  gives  the  balance 


THE  CENTRAL  GROCERY  COMPANY 


115 


116      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


§PJ 
22 


THE  CENTRAL  GROCERY  COMPANY 


117 


at  the  close  of  the  day,  and  the  four  balances  added  together 
should  agree  with  the  balance  as  taken  from  the  general  ledger 
control. 

It  should  be  stated  at  this  point  that  the  accounts  receivable 


118      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

ledger  where  this  system  is  used  is  kept  by  mechanical  methods, 
and  it  is  very  easy  to  obtain  the  balance  due  from  customers  at 
the  close  of  each  day's  business. 

The  balance  obtained  from  the  posting  machine  is  compared 
with  the  balance  as  shown  by  the  summary  and,  of  course,  should 
be  in  agreement. 


THE  CENTRAL  GROCERY  COnfAtTY 

STATEnEMT   Or  LIABILITIES  FOR  THE  PER  OD  EMD  MG 


KCT 

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Form  117   (Left) 

The  particular  benefit  derived  from  this  method  of  accounting 
is  that  the  trial  balance  of  the  subsidiary  accounts  receivable 
ledger  is  always  in  agreement  with  the  control  in  the  general 
ledger,  obviating  the  necessity  of  detailed  checking  to  locate 
variations  at  the  close  of  the  month. 

Form  115     Journal. — The  form  of  journal  used  in  this  sys- 


THE  CENTRAL  GROCERY  COMPANY 


119 


tern  is  a  three-column  sheet.  The  first  column  is  used  for  the 
detail  of  either  debits  or  credits,  and  the  other  two  columns  are 
used  as  in  any  journal.  Only  the  total  debits  and  credits  are 
posted  to  the  general  ledger,  the  detail  being  inserted  for  posting 
to  the  subsidiary  ledgers  or  to  the  analysis  sheets. 

Form  116    Private  Ledger. — This  form  is  inserted  as  a  sam- 


THE   CENTRAL  GROCERY  COnPArtY 

STATEMENT  Of  ASSETS   TOR  THE  PERIOD  END  flG                                                                           I9E 

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Form  117   (Right) 


pie  and  does  not  differ  materially  from  the  ordinary  ledger  sheet, 
except  that  it  provides  for  both  the  account  name  and  number. 
It  will  be  noted  that  there  is  only  one  balance  column.  The  name 
of  the  account  and  its  location  in  the  chart  or  classification  should 
indicate  whether  a  debit  or  credit  balance,  or,  if  desired,  red  ink 
may  be  used  for  credit  balances. 


120      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Form  117  Statement  of  Assets  and  Liabilities. — This  state- 
ment, while  similar  to  the  one  used  in  the  preceding  system,  is 
made  up  in  such  a  way  that  it  eliminates  the  necessity  of  draw- 
ing off  a  trial  balance  from  the  general  ledger  in  a  separate  book. 
This  form  together  with  the  statement  of  revenues  and  expenses, 
form  118,  is  intended  to  be  the  trial  balance  of  the  general 
ledger.  The  accounts  are  arranged  in  the  same  order  as  the 
chart  of  accounts  which  is  set  up  with  particular  reference  to 
classification.  The  form  is  ruled  with  four  money  columns,  the 
first  two  carrying  figures  this  year,  the  others  for  the  same  in- 
formation last  year.  The  detail  column  is  to  be  used  for  in- 
serting the  balance  of  the  different  accounts  under  each  main 
heading,  as,  for  instance,  under  the  cash  accounts  the  balance 
of  accounts  1,  2  and  3  would  be  inserted  in  the  detail  column, 
then  the  sum  of  the  three  amounts  would  be  entered  in  the 
total  column.  The  four  small  columns  headed  "%"  are  to  be 
used  in  this  form  for  figuring  the  percentage  of  the  various 
classes  of  assets  to  the  total  assets  and  the  various  classes  of 
liabilities  to  the  total  liabilities.  The  account  numbers  are  clearly 
indicated  so  that  there  should  be  no  difficulty  in  transferring  the 
balances  shown  in  the  general  ledger  to  the  statements.  The  only 
difficulty  which  might  be  experienced  in  making  up  the  form 
is  the  fact  that  the  reserves  for  the  various  asset  accounts  are 
deducted  therefrom  instead  of  being  shown  on  the  liability  side 
of  the  balance  sheet. 

A  more  complete  detail  of  the  various  accounts  will  be  given 
in  describing  the  functions  and  operation  of  the  general  ledger. 

In  the  statement  of  liabilities  the  last  item,  profit  and  loss,  ac- 
count 163,  is  the  amount  needed  to  balance  the  income  and  ex- 
pense sides  of  the  profit  and  loss  statement,  form  118.  If  the 
same  figure  is  used  both  in  the  statement  of  assets  and  liabilities 
and  in  the  statement  of  revenues  and  expenses,  the  correctness 
of  the  trial  balance  is  proved  and  at  the  same  time  the  result  of 
the  operations  during  the  period  determined. 

At  the  bottom  of  the  liability  sheet  is  a  summary  of  the  profit 
and  loss  statement  containing  the  same  information  in  condensed 
form  as  is  shown  on  form  118.  This  has  been  placed  on  form 
117  for  convenience  only,  and  enables  the  executive  when  re- 
viewing the  statement  to  have  before  him  on  one  sheet  the 


THE  CENTRAL  GROCERY  COMPANY 


121 


makeup  of  his  profit  and  loss,  showing  the  totals  of  the  various 
items  of  expense. 

Form    118     Statement    of    Revenues   and    Expenses. — This 
form  is  the  profit  and  loss  section  of  the  trial  balance  and  carries 


122      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


the  same  information  with  respect  to  the  current  year  and  the 
previous  year  as  the  statement  of  assets  and  liabilities,  form  117. 
The  profit  and  loss  statement  is  worked  out  by  inserting  the 
balance  of  the  various  revenue  and  expense  accounts,  making 
indicated  additions  and  deductions  in  arriving  at  the  profit  for 


THE  CENTRAL  GROCERY  COMP/W 
STATEMENT   OF  REVENUES  AND  EXPErtSES  FOR  THE  PERIOD  ENDING                                      \3i 

<3 

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Form  118   (Right) 

the  current  month,  as  well  as  for  the  year  to  date,  and  also 
comparative  figures  with  previous  year. 

On  this  form  columns  headed  "%"  are  used  to  work  out  the 
relationship  between  sales  and  the  various  items  of  income  and 
expense.  The  item  of  net  sales  is  taken  as  100%. 

The  reverse  side  of  form  118  has  the  same  ruling  and  is  used 
as  a  trial  balance  for  the  salesmen's  ledger  which  is  subsidiary 
to  accfount  121.  This,  account  operates  as  a  liability  inasmuch  as 


THE  CENTRAL  GROCERY  COMPANY 


123 


^=^ 

-f 

2; 

< 

s 

a 

2 

a: 

1 

U 

5 

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c 

o 

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o 

g 

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the  salesmen  have  not  ordinarily  drawn  the  full  amount  of 
salaries  or  commissions  due  them.  The  total  of  this  trial  balance 
should  agree  with  the  controlling  account  in  the  general  ledger 
and  the  total  shown  in  the  statement  of  liabilities  is  the  balance 
of  account  121. 


124      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Form  1 19  Salesman's  Order. — This  form  is  made  out  in 
duplicate  by  the  salesman.  The  original  is  forwarded  to  the 
office  and  the  duplicate  retained  in  the  salesman's  order  book. 

By  referring  to  the  form  it  will  be  seen  that  at  the  extreme 
right  there  are  two  columns  headed  "Salesmen  must  not  use 
these  columns."  The  first  column  is  intended  to  carry  the  charge 
to  the  customer  and  is  figured  by  a  clerk  assigned  to  that  work 
in  the  office.  The  right-hand  column  is  to  be  used  for  the  cost, 
which  is  taken  from  the  going  inventory  sheets. 

Form  120  Accounts  Receivable  Ledger. — This  form  is  ruled 
so  as  to  utilize  all  available  space  on  the  sheet,  there  being  two 
debit  columns,  two  credit  columns,  and  two  balance  columns ;  the 
idea  is  to  reduce  as  much  as  possible  the  size  of  the  ledger.  The 
sheet  used  for  the  mechanical  posting  is  the  same  as  the  form 
submitted  except  that  the  money  columns  are  without  units  and 
there  is  only  one  set  of  columns  to  a  sheet  instead  of  two. 


.DAILY  REPOHT  OF  SALES  AHD 


Form  121 

Form  121  Daily  Report  of  Sales  and  Profits. — A  new  fea- 
ture of  this  system  is  the  daily  report  on  the  sales  and  profits. 
This  report  is  made  up  daily  for  the  benefit  of  the  executive  offi- 
cers of  the  company  and  is  prepared  by  summarizing  the  sales 
and  cost  of  sales  for  each  salesman.  The  percentage  column  is 
intended  to  show  the  percent  of  gross  profit  earned  by  each 
salesman  each  day.  The  total  enables  the  executive  to  keep  in 
touch  with  the  business  from  day  to  day  and  also  to  note  whether 
the  percentage  of  gross  profit  earned  is  sufficient  for  the  company 
to  operate  successfully. 


CHAPTER  XIV 

THE  CENTRAL  GROCERY  COMPANY 
ACCOUNTS 

ASSETS  AND  LIABILITIES 

Particular  attention  is  called  to  the  arrangement  of  the  ac- 
counts in  the  following  chart  which  may  be  set  up  as  a  model, 
not  only  on  account  of  the  fact  that  it  is  in  accordance  with  the 
requirements  of  the  banks  but  also  from  the  fact  that  it  illus- 
trates the  fundamental  principles  of  chart  making.  The  simplest 
and  most  logical  rule  in  arranging  a  chart  of  accounts  is  to 
resort  to  the  numerical  arrangement,  working  on  the  nine  digits. 
This  scheme  of  arrangement  enables  the  system  builder  to  add  to 
his  original  lay-out  an  indefinite  number  of  accounts  through  the 
use  of  the  decimal  point  and  letters  without  disarranging 
his  chart. 

As  a  specific  example  of  what  is  meant  by  this  scheme  we  will 
take  the  accounts  receivable  which  in  this  chart  is  No.  21.  We 
will  suppose  that  the  volume  of  business  in  this  concern  is  such 
that  it  is  necessary  after  some  years  of  operation  to  increase 
the  number  of  sales  ledgers  from  one  to  three.  This  under  ordi- 
nary circumstances  would  necessitate  rearranging  the  chart  of 
accounts  to  take  in  the  additional  controlling  accounts  to  operate 
the  ledgers.  The  problem  where  the  numerical  arrangement  is 
used  is  very  simple,  for  if  we  consider  21  to  be  the  number 
indicating  accounts  receivable  we  can  add  as  many  subsidiary 
ledgers  as  we  like  by  calling  the  first  one  account  21.1,  the  second 
21.2,  the  third  21.3  and  so  on. 

As  a  further  illustration  we  will  consider  that  it  is  desired  to 
divide  ledger  number  one  into  different  sections.  In  this  situa- 
tion, the  first  section  would  be  21.1  A  and  the  next  21.1B,  etc. 
It  will  readily  be  seen  that  this  arrangement  is  capable  of  un- 
limited expansion  without  in  any  way  disarranging  the  original 
chart. 

The  scheme  of  adhering  to  the  nine  digits  is  thus  explained. 

125 


126      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

We  will  consider  the  specific  example  before  us,  the  Central 
Grocery  Company.  Each  main  group  is  assigned  a  number 
from  1  to  9.  For  the  cash  accounts  the  nine  digits  are  used 
and  the  accounts  numbered  1  to  9  inclusive  or  as  many  of  these 
numbers  as  may  be  necessary.  Notes  receivable  begins  with  11 
and  the  numbers  to  and  including  19  may  be  used ;  the  accounts 
receivable  starting  with  21  and  using  to  29  inclusive,  thus 
through  the  various  classifications  of  the  asset  accounts,  giving 
9,  99  or  999  possible  groups  for  assets.  Starting  the  liabilities 
at  one  again  and  adding  ciphers  we  have  for  the  first  main 
group  notes  payable  101,  accounts  payable  111,  salesmen's  ledger 
121,  accrued  expenses  131,  etc.  By  this  method  therefore  we  have 
9,  99  or  999  possible  classifications  on  the  liability  side  which 
permits  unlimited  expansion  through  the  use  of  the  decimal 
system  above  outlined. 

The  same  plan  is  followed  in  the  income  and  expense  section, 
starting  with  account  201  for  sales  and  allowing  our  9  groups  in 
the  income  section  and  if  we  had  a  sufficient  number  of  accounts 
we  would  start  with  301  for  the  expenses.  In  this  particular- 
system,  however,  it  is  not  necessary  on  account  of  the  small 
number  of  ledger  accounts  operated. 

On  the  page  immediately  following  the  chart  of  accounts  will 
be  found  the  form  which  should  be  used  in  specifying  to  the 
printers  the  binders  which  are  required  for  various  forms.  In 
each  case  the  marking  should  be  clearly  indicated  as  well  as  the 
size  of  the  sheet.  On  page  129  are  also  shown  the  specifications 
for  the  special  tab  division  leaves  to  be  used  as  an  index  to  the 
general  ledger.  The  numbers  on  the  tabs  indicate  the  accounts 
in  the  particular  classification. 

THE  CENTRAL  GROCERY  COMPANY 
CHART  OF  ACCOUNTS 

CASH  ACCOUNTS 

1  Office  Fund 

2  The  First  National  Bank  of  Mobile 

3  Mobile  National  Bank 
4 


NOTES  RECEIVABLE 

11  Customers'  Notes 

12  Sundry  Notes 

less 
16     Notes  Receivable  Discounted 


THE  CENTRAL  GROCERY  COMPANY  ACCOUNTS  127 

ACCOUNTS  RECEIVABLE 

21     Sales  Ledgers 

less 

27     Discount  on  Accounts  Receivable 
28 
29 

INVENTORY  ACCOUNTS 

31     Merchandise 

less 

37     Discount  on  Merchandise 
38 
39 

FURNITURE  &  FIXTURES 

41     Furniture  &  Fixtures 

less 

48     Depreciation  on  Furniture  &  Fixtures 
49 

OUTSIDE  INVESTMENTS 
51 
52 
53 

MISCELLANEOUS 

01     Salesman's  Collections 

62  Postdated  Checks 

63  Suspense 

64  Transportation  Claims 
65 

66 

PREPAID  EXPENSES 

71  New  Building  Account 

72  Unexpired  Insurance 

73  Unexpired  Interest 

74  Unexpired  Taxes 

75  Catalogue 
76 

77 

NOTES  PAYABLE 

101  Bank  Discounts 

102  Sundry  Notes 
103 

ACCOUNTS  PAYABLE 

111  Purchase  Ledger 

112  Sundry  Accounts 

less 

117     Discount  on  Accounts  Payable 
118 

SALESMEN'S  LEDGER 

121     Salesmen's  Salaries 
122 


128      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

DIVIDEND  ACCOUNT 
138     Dividend 

RESERVE  ACCOUNTS 

151  Reserve  for  Bad  Accounts 

152  Reserve  against  Merchandise 
153 

154 

CAPITAL  ACCOUNTS 

161  Capital  Stock 

162  Surplus 

163  Profit  &  Loss 
164 

SALES 

201  Sales 

201  Less  Returned 

201  Net  Sales 

221  Cost  of  Sales 

DEDUCTIONS  FROM  GROSS  PROFIT 

241  Cash  Discount  on  Sales 

242  Merchandise  Discount 

243  Freight  Outward 

244  Cartage  Outward 
245 

246 
247 

COMMERCIAL  EXPENSES 

251  Selling  Expense 

252  Shipping  Expense 

253  Office  Expense 

254  General  Expense 
255 

256 

SUNDRY  GAINS 

261  Purchase  Discount 

262  Special  Discount  on  Merchandise 

263  Sales  Discount  Not  Taken  by  Customers 

264  Interest  Received 

265  Rent  from  Sub-tenants 
266 

267 
268 
269 
270 

SUNDRY  LOSSES 

281  Interest  Expired 

282  Bad  Accounts  Estimated 

283  New  Building — Proportion 

284  Depreciation  on  Furniture  &  Fixtures 
285 

286 
287 
288 
289 


THE  CENTRAL  GROCERY  COMPANY  ACCOUNTS 

THE  CENTRAL  GROCERY  CO. 

BINDERS 
1     Binder  with  Private  Lock — 2  inch  for  sheet  11x12,  marked 


129 


GENERAL  LEDGEB 
THE  CENTRAL  GROCERY  Co. 


1     %  Sectional  Post  Corduroy  Binder  for  sheet  11x14,  marked — posts  to 
left 

AUDITED  INVOICES  RECORD 
THE  CENTRAL  GROCERY  Co. 


1     %  Sectional  Post  Corduroy  Binder  for  sheet  11x14,  marked — posts  to 
left.  

GENERAL  RECORDS 
THE  CENTRAL  GROCERY  Co. 


SPECIAL  TAB  DIVISION  LEAVES—  GENERAL  LEDGER 

Size  11  x 

12—  Buff 

POSITION 

COLOR 

POSITION 

COLOR 

Cash 

Accounts                   1 

Green 

Dividends 

4 

Red 

1-9 

138-139 

Notes 

Reserve 

Receivable                 2 

Green 

Accounts 

5 

Red 

10-19 

loO-li>9 

Accounts 

Capital 

Receivable                 3 

Green 

Accounts 

6 

Red 

20-29 

160-169 

Inventory 

Sales 

Accounts                    4 

Green 

Accounts 

7 

Red 

30-39 

200-239 

Furniture 

Ded.  from 

&  Fixtures                5 

Green 

Gr.  Profit 

8 

Green 

40-49 

240-249 

Outside 

Expenses 

9 

Green 

Investments              6 

Green 

250-259 

50-59 

Miscel. 

Gains 

1 

Red 

Assets                         7 

Green 

260  279 

60-69 

Prepaid 

Losses 

3 

Green 

Expenses                    8 

Green 

280-299 

70-79 

Notes 

Payable                      9 

Red 

Journal 

5 

Buff 

100-109 

130      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


POSITION 

COLOR 

POSITION 

COLOR 

Accounts 
Payable 
110-119 

1 

Red 

Trial 
Balance                      7 

Buff 

Salesmen's 
Ledger 
121 

2 

Red 

Salesmen's 
Accounts                   9 
121-1  &c 

Buff 

Accrued 
Expenses 
130-137 

3 

Red 

To  be  punched  to  fit  General  Ledger  Binder. 

SPECIAL  TAB  DIVISION  LEAVES— GENERAL  RECORDS 

Size  11x14— Buff 

POSITION         COLOR  POSITION         COLOR 

Cash  Mobile  Nat. 

Received  1  Green  Bank  3  Green 

First  Nat.  Accounts 

Bank  2  Green  Receivable  4  Green 

In  describing  the  functions  and  operations  of  the  various 
general  ledger  accounts  we  will  take  up  in  detail  only  those  which 
seem  to  be  out  of  the  ordinary  or  which  have  some  special  method 
of  operation.  The  others  will  be  mentioned  only  in  a  gen- 
eral way. 

Accounts  i,  2  and  3  Cash  Accounts. — These  are  ordinary 
imprest  cash  and  bank  accounts.  The  imprest  fund  balance 
remains  the  same  unless  the  fund  is  increased  or  decreased  during 
the  period. 

The  bank  accounts  are  debited  with  cash  received  and  credited 
with  cash  paid  out,  the  balance  representing  the  amount  on 
hand  in  the  bank.  This  balance  should  be  reconciled  with  the 
statement  received  from  the  bank,  taking  into  consideration  the 
checks  outstanding. 

Account  ii  Customers  Notes. — Debit  for  notes  taken  from 
customers,  the  offsetting  credit  being  to  accounts  receivable  or 
a  sales  account. 

Credit  with  cash  received  from  customers  in  settlement  of 
notes. 

The  balance  represents  the  amount  of  notes  receivable  due 
from  customers. 

Account  12  Sundry  Notes. — Debit  with  amount  of  notes  re- 
ceived from  persons  other  than  customers,  the  offsetting  credit 
being  to  cash  or  an  income  account  as  the  case  may  be. 


THE  CENTRAL  GROCERY  COMPANY  ACCOUNTS  131 

Credit  with  amounts  received  in  settlement  of  sundry  notes. 

The  balance  represents  sundry  notes  due  from  various  persons. 

Account  1 6  Notes  Receivable  Discounted. — This  account 
should  have  a  credit  balance  and  is  intended  to  represent  the 
contingent  liability  of  the  concern  for  notes,  both  customers  and 
sundry,  which  have  been  discounted  at  the  bank  but  which  have 
not  as  yet  been  paid.  The  operation  of  the  account  is  as  follows : 

Whenever  a  note  receivable  is  discounted  at  the  bank  an  entry 
is  made  in  the  cash  book  debiting  cash  and  crediting  notes  re- 
ceivable discounted  for  the  face  of  the  note.  The  discount  is  of 
course  worked  out  through  the  interest  and  discount  account. 

When  the  note  is  paid  at  the  bank  and  advice  is  received  to 
that  effect,  a  journal  entry  is  made  debiting  account  16,  notes 
receivable  discounted,  and  crediting  account  11,  customers  notes, 
or  account  12,  sundry  notes,  as  the  case  may  be,  for  the  face  of 
the  note  so  paid. 

The  balance  of  this  account  represents  the  amount  of  notes 
which  have  been  discounted  at  the  bank  and  which  are  still 
unpaid. 

In  preparing  the  monthly  statement  of  assets  and  liabilities 
the  balance  should  be  deducted  from  the  sum  of  the  debit  balances 
of  accounts  11  and  12. 

Account  21  Accounts  Receivable. — This  account  is  the  or- 
dinary sales  ledger  or  accounts  receivable  account  and  does  not 
require  special  explanation. 

Account  27  Discount  on  Accounts  Receivable. — While  this 
account  is  comparatively  simple  in  its  operation  it  is  perhaps 
well  to  explain  somewhat  in  detail  the  purpose  for  which  it  is 
intended  and  its  mechanical  operation. 

In  a  business  where  the  customers  are  entitled  to  the  cash  dis- 
count, should  they  pay  their  bills  within  a  specified  time,  it  seems 
logical  that  the  concern  granting  this  discount  can  expect  as  a 
return  for  merchandise  sold,  only  the  sum  of  the  net  sales  less  the 
possible  discount.  If  some  of  the  customers  are  less  fortunate 
than  others  and  are  unable  to  discount  their  bills  it  does  not  seem 
logical  that  the  business  should  estimate  its  returns  from  the 
sales  as  the  amount  of  such  sales  less  only  discount  actually 
taken.  It  seems  rather,  so  far  as  the  income  from  sales  is  con- 
cerned, that  we  should  set  up  as  probable  income  the  amount 
which  would  be  realized  if  all  customers  took  advantage  of  the 


132      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

discount  and  that  the  amount  which  is  not  taken  should  be  in- 
cluded in  our  income  from  sources  outside  of  trade  operation,  or 
sundry  gains. 

Another  point  which  seems  to  support  this  theory  is  that  our 
item  of  net  sales,  that  is  gross  sales  less  returns  and  allowances 
less  discount,  if  only  discount  actually  taken  be  considered,  would 
show  a  wide  fluctuation  if  all  our  customers  in  one  period  were 
able  to  take  their  discount  while  in  the  preceding  or  succeeding 
period  they  could  not  do  so  to  the  full  extent.  It  is  obvious 
from  even  the  most  casual  observance  of  this  feature  that  if  we 
consider  net  sales  as  100%  in  computing  our  income  and  expense 
percentages  a  wide  fluctuation  in  these  items  would  result  if 
we  did  not  take  steps  to  stabilize  the  basis  used  as  100%. 

With  the  above  in  mind,  therefore,  we  contemplate  taking  into 
account  the  entire  discount  which  might  be  allowed  on  sales, 
which  we  charge  to  account  241  and  credit  to  account  263. 

At  the  close  of  the  first  period  account  27  is  set  up  by  crediting 
1%,  the  discount  allowed  by  this  concern,  of  the  amount  of  ac- 
counts receivable  due  from  customers  and  subject  to  cash  discount 
as  shown  by  an  analysis  of  account  21.  This  amount  is  charged 
to  sales  discount  not  taken  by  customers,  account  263,  and 
credited  to  account  27. 

At  the  end  of  each  succeeding  period  account  27  is  adjusted 
so  that  the  balance  will  represent  1%  on  the  amounts  due  from 
customers  and  subject  to  discount,  the  offsetting  debit  or  credit 
being  in  each  case  to  account  263.  In  preparing  the  monthly 
statement  of  assets  the  credit  balance  of  account  27  is  deducted 
from  the  debit  balance  of  account  21,  thus  showing  as  an  asset 
only  the  amount  due  from  customers  less  discounts. 

Account  31  Merchandise. — This  is  an  ordinary  merchandise 
account  and  requires  no  detailed  explanation.  The  balance  at 
the  beginning  of  the  period  represents  inventory  on  hand  at 
that  time.  Purchases  during  the  year  are  debited  and  cost  of 
sales  credited  to  the  account,  so  that,  in  theory  at  least,  at  the 
close  of  each  year  the  balance  should  represent  the  physical 
inventory.  As  a  matter  of  fact,  some  adjustments  are  necessary 
at  each  closing  in  order  to  reconcile  the  balance  with  the  actual 
inventory  taken. 

Account  37  Discount  on  Merchandise. — By  referring  to 
the  explanation  given  under  account  27  it  will  be  noted  that  in 


THE  CENTRAL  GROCERY  COMPANY  ACCOUNTS  133 

this  system  we  give  recognition  to  the  discounts  both  income  and 
expense  in  a  different  manner  than  perhaps  they  are  ordinarily 
considered. 

This  account  operates  in  much  the  same  manner  as  account  27 
and  is  used  so  that  only  the  discount  earned  on  merchandise  sold 
will  be  included  as  income  in  the  period  under  review. 

This  account  is  credited  at  the  close  of  a  period  with  1^%, 
the  average  discount  011  purchases,  of  the  balance  in  account  31, 
the  offsetting  debit  being  to  account  261. 

The  balance  represents  the  amount  of  purchase  discounts 
applicable  to  merchandise  which  has  not  yet  been  sold,  and  is 
therefore  not  taken  into  the  profits  of  the  period.  This  entry 
is  not  reversed,  but  the  balance  is  adjusted  at  the  close  of  each 
succeeding  period,  the  offsetting  debit  or  credit  in  each  case  being 
to  account  261. 

In  preparing  the  statement  of  assets  at  the  close  of  the  period 
the  credit  balance  of  account  37  is  deducted  from  the  debit  bal- 
ance of  account  31. 

Account  41  Furniture  and  Fixtures. — This  is  the  ordinary 
property  account  representing  the  investment  in  furniture  and 
fixtures.  It  is  charged  with  the  original  investment  at  the  time 
of  opening  the  account  and  then  with  purchases  of  permanent 
furniture  and  fixtures.  The  credits  to  the  account  would  be  for 
items  of  equipment  sold  or  otherwise  disposed  of,  the  balance 
representing  the  net  cost  of  such  equipment  on  hand. 

Account  48  Depreciation  of  Furniture  and  Fixtures. — This 
is  the  reserve  for  depreciation  of  furniture  and  fixtures,  and  at 
the  close  of  each  month  it  is  credited  for  1/12  of  the  estimated 
annual  depreciation,  the  offsetting  debit  being  to  account  284. 
The  balance  of  the  account  represents  the  amount  reserved  to 
date,  and  in  preparing  a  statement  of  assets  is  deducted  from  the 
debit  balance  of  account  41. 

Account  61  Salesman's  Collections. — This  account  is  charged 
with  the  amount  of  collections  reported  by  the  salesman,  and  is 
credited  for  the  cash  received  from  the  salesman  on  account  of 
collections  from  customers.  The  balance  represents  collections 
reported  by  the  salesman  for  which  remittance  has  not  yet  been 
received.  The  balance  is  considered  a  miscellaneous  asset  and  is 
so  shown  in  preparing  the  statement  of  assets. 

Account  62     Postdated  Checks. — A  situation  which  seems  to 


134      8YHTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

be  peculiar  to  this  particular  business  is  that  a  considerable 
number  of  postdated  checks  are  received  which  logically  should 
not  be  credited  to  the  customers'  accounts  until  they  are  de- 
posited and  collected  by  the  bank. 

In  order  to  take  care  of  this  situation  two  columns  have  been 
provided  in  the  cash  receipts  book  (see  form)  so  that  when  a 
postdated  check  is  received  from  a  customer  it  is  entered  in  the 
sales  ledger  column,  but  instead  of  being  extended  in  the  net 
amount  received  column  it  is  extended  in  the  postdated  checks 
column  under  the  charges  section  of  the  sheet.  This  operates  to 
set  up  a  miscellaneous  asset  representing  checks  on  hand  which 
are  postdated. 

When  the  check  is  deposited  it  is  again  entered  in  the  record 
of  cash  received,  this  time  in  the  postdated  checks  credit  column, 
and  then  extended  in  the  net  amount  received  column.  The 
postdated  check  credit  column  will  offset  the  debit  previously 
set  up,  thus  transferring  the  amount  from  the  postdated  checks 
account  to  the  cash  account.  The  balance  of  this  account  would 
represent  postdated  checks  on  hand. 

Account  63  Suspense. — This  account  is  established  to  carry 
such  accounts  receivable  as  are  considered  doubtful  of  collection 
and  is  the  step  taken  preceding  the  transfer  of  such  accounts  to 
the  reserve  for  losses  on  bad  debts.  In  other  words  when  an 
account  contained  in  the  sales  ledgers,  account  21,  becomes  doubt- 
ful of  collection  it  is  transferred  to  account  63,  suspense.  Efforts 
are  still  made  to  effect  a  collection,  but  if  the  account  is  finally 
determined  to  be  uncollectible,  it  is  charged  against  the  reserve 
for  loss  on  bad  debts,  the  credit  being  to  suspense  instead  of  direct 
to  accounts  receivable. 

The  reason  for  thus  separating  doubtful  accounts  is  in  order 
to  have  in  the  books  such  an  arrangement  of  accounts  as  will 
enable  the  preparation  of  financial  statements  showing  current 
assets  and  current  liabilities  without  the  necessity  of  making 
numerous  adjustments  or  deductions  for  doubtful  items.  It  also 
brings  all  doubtful  accounts  together  for  more  frequent  reviewing 
than  is  given  the  regular  accounts  receivable. 

Account  64  Transportation  Claims. — This  account  repre- 
sents the  amount  of  accounts  receivable  due  from  transportation 
companies  on  account  of  claims  which  are  separated  from  ac- 
counts receivable  so  that  the  accounts  receivable  sales  ledger  will 


THE  CENTRAL  GROCERY  COMPANY  ACCOUNTS  135 

represent  sales  to  customers  made  in  the  regular  course  of  busi- 
ness as  distinguished  from  other  transactions,  and  which  may  not 
be  so  good.  The  latter  are  usually  classed  as  sundry  assets. 

Accounts  71  to  75  Inclusive. — These  accounts  are  the  ordi- 
nary prepaid  and  deferred  expense  accounts  and  do  not  need 
detailed  explanation,  except,  perhaps,  in  the  case  of  account  71. 

At  the  time  this  corporation  opened  the  branch  store  it  was 
necessary  to  construct  one  or  two  small  buildings  adjoining  the 
property  which  they  leased  in  order  to  store  their  equipment, 
etc.  Inasmuch  as  they  would  not  be  able  to  realize  anything 
from  their  investment  when  the  lease  expired  it  was  considered 
advisable  to  prorate  the  expense  of  these  buildings  over  the  life 
of  the  lease.  The  cost  was  therefore  debited  to  this  account  and 
at  the  close  of  each  period  an  adjustment  is  made,  debiting  to 
expenses  of  the  period  the  proportion  distributable  to  it.  Ac- 
count 71  is  credited,  the  offsetting  charge  being  to  account  283. 

The  balance  of  this  account  represents  the  cost  of  the  buildings 
still  to  be  written  off  over  the  life  of  the  lease  and  is  shown  as  a 
prepaid  expense  on  the  monthly  statement. 

Perhaps  it  would  be  well  to  state  that  account  75,  catalogue, 
represents  the  expense  of  advertising  matter  incurred  during  a 
given  period  but  not  charged  to  operations  as  the  advertising 
matter  has  not  all  been  used  at  the  close  of  the  period. 

The  balance  of  the  account  represents  the  estimated  value  of 
catalogues  or  advertising  matter  on  hand  at  the  close  of  the 
period. 

Account  10 1  Bank  Discounts — Is  the  ordinary  notes  pay- 
able account  except  that  only  borrowings  from  the  bank  are 
shown  therein.  All  other  loans  negotiated  through  the  use  of 
notes  are  included  in  account  102,  sundry  notes. 

The  balance  of  these  accounts  represents  the  liability  of  the 
corporation  to  creditors  on  account  of  notes  payable  outstanding. 

Account  in  Purchase  Ledger — Is  the  ordinary  accounts 
payable  account  representing  amounts  due  creditors  for  purchases 
and  expenses. 

Credit  at  the  close  of  the  month  with  the  amount  of  purchases 
as  shown  by  the  footing  of  the  ledger  column  in  the  record  of 
audited  invoices.  Debit  at  the  close  of  the  month  for  the  cash 
payments  on  account  of  accounts  payable  as  shown  by  the  footing 
of  the  corresponding  column  in  the  record  of  checks  drawn. 


136      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

The  balance  represents  the  amount  due  creditors. 

Account  112  Sundry  Accounts. — In  designing  any  system 
of  accounts  it  will  be  found  that  numerous  small  purchases  are 
made  for  which  in  many  cases  checks  are  drawn,  but  which  are 
considered  so  small  that  it  is  inadvisable  to  open  a  ledger  account 
with  the  vendors.  This  brings  up  a  rather  difficult  situation  as 
the  system  builder  has  the  option  of  opening  a  series  of  ledger 
accounts  with  creditors  from  whom  a  small  number  or  perhaps 
only  one  purchase  is  made,  or  of  devising  some  other  means  of 
meeting  the  situation. 

By  referring  to  the  record  of  audited  invoices  form  it  will  be 
seen  that  a  sundry  column  has  been  provided.  It  is  intended, 
whenever  an  invoice  is  received  from  a  creditor  with  whom  we  do 
not  wish  to  open  a  ledger  account,  that  the  amount  of  the  invoice 
shall  be  entered  in  the  sundry  column  instead  of  the  ledger 
column.  The  invoice  is  then  passed  through  the  usual  channels 
and  when  the  check  is  drawn  the  amount  is  entered  in  the  sundry 
charges  column  in  the  record  of  checks  drawn,  form  113,  instead 
of  the  ledger  column,  the  theory  being  that  the  credit  from  the 
audited  invoices  record  is  offset  by  the  debit  from  the  record  of 
checks  drawn,  so-  that  at  the  close  of  any  period  no  balance  re- 
mains in  the  account. 

To  review  briefly,  therefore,  account  112  is  credited  for  the 
amount  of  purchases  from  vendors  with  whom  we  have  no  ledger 
account  as  show'n  by  the  footing  of  the  sundry  column  in  the 
audited  invoices  record. 

Debit  with  the  amount  of  checks  drawn  in  settlement  of  such 
invoices  as  shown  by  the  footing  of  the  corresponding  column  in 
the  record  of  checks  drawn  book. 

The  balance  of  the  account  represents  the.  unpaid  sundry  bills. 

Account  117  Discount  on  Accounts  Payable. — This  is  the 
third  of  the  special  accounts  peculiar  to  this  concern  used  in 
allocating  discounts  to  their  proper  periods. 

Debit  at  the  end  of  the  period  with  1M>%  °f  the  amount  due 
creditors  as  shown  by  the  balance  of  account  111,  the  offsetting 
credit  being  to  account  261 . 

The  balance  represents  the  amount  of  purchase  discounts  taken 
into  account  on  unpaid  creditors  balances.  This  balance  is  ad- 
justed at  the  close  of  each  period  so  thatrit  will  represent 
of  the  balance  in  account  111. 


THE  CENTRAL  GROCERY  COMPANY  ACCOUNTS  137 

It  will  be  seen  by  reviewing  the  discount  accounts  and  the 
corresponding  reserves  that  no  anticipation  of  profits  or  discount 
results  as  the  discount  finally  taken  into  profits  is  only  that 
which  has  been  earned  on  the  merchandise  sold. 

Account  121  Salesmen's  Salaries. — This  account  is  a  con- 
trolling account  in  the  general  ledger  for  the  salesmen's  accounts 
in  the  salesmen's  ledger. 

Credit  for  the  salaries  and  commissions  earned,  distribution 
being  made  in  the  salesmen's  ledger ;  debit  for  cash  paid  to  the 
salesmen  on  account  of  salaries  and  commissions. 

The  balance  represents  the  liability  on  account  of  amounts  due 
the  salesmen. 

Account  138  Dividend. — This  account  is  the  ordinary  divi- 
dend account,  credited  for  the  .amount  of  dividends  declared, 
the  offsetting  debit  being  to  surplus,  and  debited  for  cash  paid 
as  dividends. 

The  balance  represents  unpaid  dividends. 

Account  151  Reserve  for  Bad  Accounts. — -At  the  close  of 
each  month  an  adjusting  entry  is  made  debiting  account  282 
and  crediting  account  151  for  1/12  of  the  estimated  losses  on 
account  of  bad  debts  for  the  year.  The  account  is  -debited  with 
such  accounts  as  are  definitely  ascertained  to  be  worthless. 

The  balance  represents  the  reserve  against  probable  losses  from 
bad  accounts  receivable. 

Account  152  Reserve  Against  Merchandise. — This  account 
is  intended  to  be  used  for  setting  aside  a  part  of  the  surplus  to 
cover  possible  loss  from  inventory  shrinkage. 

Accounts  161  to  163  Capital  Accounts.— The  capital  ac- 
counts for  this  business  do  not  require  detailed  explanation  as 
their  method  of  operation  conforms  to  the  usual  capital  stock, 
surplus  and  profit  and  loss  accounts. 


CHAPTER  XV 

INCOME  ACCOUNTS 

In  considering  the  accounts  included  in  the  income  section  of 
the  system  it  seems  advisable  to  take  in  not  only  the  accounts 
showing  income  from  operations,  but  also  those  deductions  which 
are  directly  allocable  to  a  particular  source  of  income,  arriving 
at  a  point,  which,  in  this  particular  instance  we  may  definitely 
term  sales  profit. 

The  reason  for  this  is  that  before  we  can  make  disbursements 
to  cover  commercial  expenses  it  is  necessary  that  we  realize  from 
our  operations  something  above  the  cost  of  the  commodity  which 
we  handle.  If  reference  is  made  to  the  statement  of  revenues 
and  expenses,  form  118,  it  will  be  seen  that  in  working  down  to 
the  sales  profit  we  give  consideration  to  discounts  and  freight 
and  carting  outward  in  addition  to  the  cost  of  the  merchandise. 

Account  201  Sales. — Credit  with  the  total  amount  of  salesi 
to  customers  as  shown  by  the  footing  of  the  corresponding  column 
in  the  sales  record. 

Debit  for  the  amount  of  sales  returns  and  allowances  as  shown 
by  the  footing  of  the  corresponding  column  in  the  sales  returns 
and  allowances  book. 

The  balance  represents  the  net  sales  for  the  period. 

In  preparing'the  statement  of  income  and  expenses  the  footing 
of  the  credit  side  is  inserted  opposite  the  word  "sales,"  the  debit 
footing  opposite  the  words  "less  returned,"  the  balance  opposite 
the  words  "net  sales." 

In  other  words,  we  simply  analyze  our  ledger  balance,  getting 
the  total  credits  and  total  debits,  working  out  the  difference  on 
the  statement  in  order  that  we  may  have  before  us  the  amount 
of  sales  which  have  been  returned. 

Account  221  Cost  of  Sales. — Debit  with  the  cost  of  mer- 
chandise sold,  as  shown  by  the  footing  of  the  corresponding 
column  of  the  cost  summary,  which  is  prepared  on  analysis  sheets. 

Credit  for  cost  of  sales  returns  as  shown  by  the  footing  of  the 
corresponding  column  on  the  returns  analysis  sheet. 

138 


INCOME  ACCOUNTS  139 

The  balance  represents  the  cost  of  goods  sold  during  the 
period. 

In  preparing  the  statement  of  revenues  and  expenses  the 
debit  balance  of  account  221  is  inserted  in  its  proper  place  on 
the  statement  and  deducted  from  the  balance  of  account  201 
shown  as  net  sales,  thus  arriving  at  the  gross  profit  on  sales. 

Account  241  Cash  Discount  on  Sales. — Debit  monthly  with 
1%  of  the  net  sales  for  the  period,  the  offsetting  credit  being  to 
account  263. 

At  the  end  of  the  period  the  balance  of  this  account  is  closed  to 
profit  and  loss  and  represents  the  amount  of  discounts  which 
would  have  been  allowed  on  sales  had  all  customers  been  able 
to  take  advantage  of  the  discount  privilege. 

Account  242  Merchandise  Discount. — Debit  from  the  cash 
received  book  with  the  amounts  deducted  by  customers  on  account 
of  merchandise  discounts  or  allowances. 

At  the  end  of  the  period  the  balance  of  this  account  is  trans- 
ferred direct  to  profit  and  loss  and  represents  the  amount  of 
merchandise  discounts  allowed  to  customers  on  sales  during  the 
period. 

Account  243     Freight  Outward 
Account  244     Cartage  Outward 

These  accounts  do  not  need  special  explanation  as  their  pur- 
pose is  obvious  from  their  titles. 

The  balances  at  the  close  of  the  period  are  closed  direct  into 
profit  and  loss. 

In  preparing  the  statement  of  revenues  and  expenses  the 
balances  of  accounts  241  to  244  inclusive  are  inserted  opposite 
their  proper  names  on  the  statement  and  the  sum  of  these  ac- 
counts obtained  in  the  space  marked  "total  deductions."  The 
amount  of  deductions  thus  ascertained  is  taken  from  the  gross 
profit  determined  above  and  the  resulting  difference  is  the  sales 
profit,  or,  in  other  words,  the  amount  of  profit  realized  from  the 
sale  of  commodities. 

It  is,  of  course,  obvious  that  the  executive  will  give  careful 
attention  to  this  amount,  being  careful  to  note  that  the  per- 
centage and  amount  are  each  high  enough  to  cover  the  commer- 
cial expenses  and  leave  a  net  profit  which  will  represent  a  fair 
return  on  capital  invested. 


CHAPTER  XVI 

COMMERCIAL  EXPENSE  ACCOUNTS 

In  discussing  the  commercial  expense  accounts,  251  to  254 
inclusive,  one  of  the  peculiar  features  of  this  system  is  brought 
out.  As  outlined  in  discussing  form  111,  it  is  intended  to  have 
only  four  general  classifications  for  the  expenses  of  the  business ; 
selling,  shipping,  office  and  general. 

Four  accounts  are  established  in  the  general  ledger  which  at 
the  close  of  each  month  are  charged  with  the  total  expenditures 
in  that  group  as  shown  by  the  footing  of  the  corresponding 
column  in  the  record  of  audited  invoices,  form  111. 

The  form  under  each  group  has  a  column  headed  "No." 
which  is  intended  to  carry  the  number  of  the  subsidiary  account. 
It  should  be  understood,  however,  that  a  subsidiary  ledger  is  not 
contemplated.  The  subsidiary  accounts  are  operated  on  analysis 
sheets  and  as  a  specific  example  we  will  take  the  first  commercial 
expense  account  which  in  the  general  ledger  is  number  251, 
selling  expense. 

It  would  seem  advisable  for  us  to  know  the  amount  expended 
for  salesmen's  salaries,  traveling  expenses,  advertising,  etc.,  so 
that  in  case  the  selling  expense  item  should  show  a  material  in- 
crease or  decrease  we  may  trace  such  variation  to  its  source.  In 
order  to  accomplish  this  without  encumbering  the  general  ledger 
with  a  multiplicity  of  small  accounts  we  analyze  the  charges  to 
the  main  control  account.  Sheets  of  analysis  paper  the  size  of 
the  books  in  this  set  are  headed  in  this  case,  "selling  expense." 
The  columns  are  headed  1,  2,  3,  etc.,  and  in  the  example  which 
we  are  considering,  column  1  would  be  salesmen's  salaries;  col- 
umn 2,  traveling  expense ;  column  3,  advertising  expense ;  etc. 

Whenever  an  entry  is  made  in  the  record  of  audited  invoices 
the  number  corresponding  to  the  account  on  the  analysis  sheet 
is  inserted  in  the  number  column  under  the  proper  heading.  At 
the  close  of  the  month,  or  at  other  convenient  times  during  the 
month,  all  items  in  the  selling  expense  column  in  the  record  of 

140 


COMMERCIAL  EXPENSE  ACCOUNTS  141 

audited  invoices  are  posted  to  the  analysis  sheet,  thus  arranging 
and  classifying  the  expenses  in  this  section. 

The  principal  advantage  derived  from  the  use  of  this  method 
is  that  the  general  bookkeeper  is  enabled  to  prepare  his  monthly 
trial  balance  and  operating  statement  without  waiting  for  his 
assistants  to  post  to  a  large  number  of  subsidiary  accounts. 

The  record  of  audited  invoices  can  be  written  up,  posted  in 
total,  and  the  general  ledger  thus  made  available  for  the  imme- 
diate work  of  preparing  financial  statements.  The  subsidiary 
records  can  be  made  up  so  that  by  the  time  the  executive  desires 
more  complete  information  on  any  particular  point  it  is  available 
for  him. 

Another  point  which  seems  to  show  the  advantage  of  this 
method  of  operation  is  that  the  number  of  accounts  contained  in 
the  general  ledger  is  very  small,  making  for  greater  efficiency  in 
the  general  ledger  work,  which  must  of  necessity  be  the  case 
if  the  records  are  to  be  used  to  good  advantage. 

In  preparing  the  statement  of  revenues  and  expenses  the 
balances  of  accounts  251  to  254  are  inserted  in  the  proper  spaces 
on  form  118  and  summarized  to  obtain  the  total  commercial  ex- 
penses, which  amount  is  deducted  from  the  sales  profit,  giving 
us  the  operating  profit  for  the  period. 

SUNDRY  GAINS 

Account  261  Purchase  Discount. — Debit  at  the  end  of  the 
period  with  1^2%  of  the  balance  of  account  31,  the  offsetting 
credit  being  to  account  37,  the  purpose  being  to  take  out  of  the 
income  for  the  period  the  amount  of  discount  on  merchandise 
still  to  be  sold. 

Credit  from  the  bank  record  with  amounts  deducted  on  ac- 
count of  discounts  taken  when  remitting  to  creditors ;  at  the  end 
of  the  first  period  with  1%%  of  the  balance  of  account  111,  the 
offsetting  debit  being  to  account  117  and  representing  the  amount 
of  discounts  not  taken  on  bills  still  outstanding.  At  the  end  of 
each  succeeding  period  adjust  account  117  by  a  debit  or  credit 
to  this  account. 

At  the  close  of  the  period  the  balance  is  closed  direct  to  profit 
and  loss  and  represents  the  amount  of  discounts  earned  during 
the  period. 

The  question  may  be  raised  as  to  why  the  purchase  discount 


142      SYSTEM  BUILD/NO  AND  CONSTRUCTIVE  ACCOUNTING 

earned  is  not  credited  to  cost  of  sales,  and  the  answer  is  that  it  is 
considered  a  capital  earning  obtained  only  by  prompt  settlement 
of  accounts.  If  necessary  to  borrow  outside  capital  from  banks 
and  others  in  order  to  discount,  the  interest  paid  is  an  offset  to 
the  discount  earned. 

Account  262  Special  Discount  on  Merchandise. — This  ac- 
count is  intended  to  show  special  discounts  made  by  creditors 
on  purchases  during  the  period.  The  balance  is  closed  to  profit 
and  loss. 

Account  263  Sales  Discount  Not  Taken  by  Customers. — 
Debit  during  the  period  with  the  amount  of  cash  discounts  taken 
by  customers  in  settlement  of  their  accounts,  as  shown  by  the 
footing  of  the  corresponding  column  in  the  cash  received  book ; 
at  the  end  of  the  period  with  1%  of  the  balance  of  account  21 
subject  to  cash  discount,  the  offsetting  credit  being  to  account  27 
as  shown  by  the  description  of  that  account. 

Credit  monthly  with  1  %  of  the  net  sales  during  the  period,  the 
offsetting  debit  being  to  cash  discount  on  sales,  account  241,  as 
outlined  in  the  description  of  that  account. 

The  balance  is  closed  to  profit  and  loss  and  represents  the  sales 
discount  not  taken  by  customers. 

Account  264  Interest  Received. — This  account  is  credited 
with  such  interest  as  may  be  received  on  deposits  with  the 
banks,  from  notes  receivable,  or  from  customers  on  overdue  ac- 
counts as  shown  by  the  footing  of  the  corresponding  column  in 
the  record  of  cash  received. 

The  balance  is  closed  to  profit  and  loss. 

Account  265  Rent  from  Sub-Tenants — Is  credited  with  rent 
received  for  space  in  the  building  which  has  been  sublet.  The 
balance  represents  rent  income  and  is  closed  to  profit  and  loss. 

It  will  be  noted  that  the  rent  income  is  treated  as  a  sundry 
gain  instead  of  as  a  credit  against  the  commercial  expenses  where 
the  charge  for  rent  paid  is  made.  This  method  of  handling  seems 
to  be  correct  as  it  would  tend  to  make  our  comparisons  from 
period  to  period  of  less  value  if  we  credited  our  expense  account 
with  such  an  item,  the  amount  of  which  would  be  contingent 
upon  whether  we  were  able  to  sublet  space  or  not. 

In  preparing  the  statement  of  revenues  and  expenses  for  the 
period  the  sundry  gains  are  inserted  in  their  proper  space  and  the 
total  of  sundry  gains  obtained. 


COMMERCIAL  EXPENSE  ACCOUNTS  143 

SUNDRY  LOSSES 

Account  281  Interest  Expired. — Debit  at  the  close  of  each 
month  with  the  interest  which  has  expired  during  the  month, 
the  offsetting  credit  being  to  account  73. 

The  balance  is  closed  to  profit  and  loss. 

Account  282  Bad  Accounts  Estimated. — Debit  at  the  close 
of  each  month  with  1/12  of  the  estimated  loss  on  bad  accounts 
for  the  year,  the  offsetting  credit  being  to  account  151. 

The  balance  represents  estimated  loss  on  bad  accounts  for  the 
year  and  is  closed  to  profit  and  loss. 

Account  283  New  Building — Proportion. — Debit  at  the  close 
of  each  month  with  1/12  of  the  amount  to  be  written  off  during 
the  year,  the  offsetting  credit  being  to  account  71. 

The  balance  represents  the  proportion  of  the  cost  of  the  new 
building  written  off  over  the  year  and  is  closed  to  profit  and  loss. 

Account  284  Depreciation  Furniture  and  Fixtures. — Debit 
at  the  close  of  each  month  with  1/12  of  the  estimated  deprecia- 
tion of  furniture  and  fixtures  for  the  year,  the  offsetting  credit 
being  to  account  48. 

The  balance  represents  the  amount  of  depreciation  on  furni- 
ture and  fixtures  and  is  closed  into  profit  and  loss. 

In  preparing  the  statement  of  revenues  and  expenses  the 
sundry  losses  are  inserted  in  their  proper  space  and  the  total 
obtained.  The  difference  between  the  total  sundry  gains  and 
total  sundry  losses  is  ascertained  and  represents  either  a  net 
sundry  gain  or  a  net  sundry  loss  for  the  period,  which  amount 
is  added  to  or  deducted  from  the  operating  profit,  giving  the  net 
profit  or  loss  to  date.  The  net  profit  or  loss  is  inserted  in  the 
statement  of  liabilities  as  the  balance  of  account  163,  and  should 
balance  the  liabilities  with  the  assets. 

A  review  of  the  statements  of  assets  and  liabilities,  revenues 
and  expenses,  together  with  a  study  of  the  forms  should  clearly 
show  that  the  necessity  for  taking  the  trial  balance  as  a  separate 
record  is  entirely  obviated. 

On  the  following  pages  are  shown  the  semi-annual  closing 
entries. 


144      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

CLOSING  ENTRIES 

31     Merchandise  (New  Inventory) 
221     Cost  of  Sales 

31  To  Merchandise 

To  close  out  the  merchandise  account  setting  up  the  new 
inventory  and  charging  the  balance  to  cost  of  sales 

201     Sales 

221  To  Cost  of  Sales 

To  transfer  the  balance  in  cost  of  sales  account  into  the 

sales  account 

201     Sales 

163  To  Profit  &  Loss 

To  transfer  the  gross  profit  on   sales   into  the  profit  and 

loss  account 

163     Profit  &  Loss 

241  To  Cash  Discount  on  Sales 

242  Merchandise  Discount 

243  Freight  Outward 

244  Cartage  Outward 

To  transfer  the  debil  balances  in  the  ubove  deductions  from 
profit  accounts  into  prout  and  loss 

163     Profit  &  Loss 

251  To  Selling  Expense 

252  Shipping  Expense 

253  Office  Expense 

254  General  Expense 

To  transfer  the  debit  balances  in  the  above  operating  ex- 
pense accounts  into  profit  and  loss 

261  Purchase  Discount 

262  Special  Discount  on  Merchandise 

263  Sales  Discount  Not  Taken  by  Customers 

264  Interest  Received 

265  Rent  from  Sub-tenants 
163  To  Profit  &  Loss 

To  transfer  the  credit  balances  iu  the  above  sundry  gain 
accounts  into  profit  and  loss 

163     Profit  &  Loss 

281  To  Interest  Expired 

282  Bad  Accounts  Estimated 

283  New  Building — Proportion 

284  Depreciation  Furniture  &  Fixtures 

To   transfer  the  debit  balances  in   the  above   sundry  loss 
accounts  into  profit  and  loss 

163     Profit  &  Loss 
162  To  Surplus 

To  transfer  the  net  profit  for  the  period  to  surplus 

162     Surplus 

153  To  Reserve  for  Federal  Taxes 

To  set  up  the  Federal  taxes  for  the  year  as  figured 

162     Surplus 

138  To  Dividend 

To  set  up  liability  for  dividends  declared, 


CLOSING  ENTRIES  145 

In  order  that  the  operation  of  the  various  discount  and  reserve 
for  discount  accounts-  may  be  clearly  understood  a  sketch  of  each 
is  shown  on  the  following  pages  with  the  debits  and  credits  to 
each  set  up  in  ledger  form. 

CASH  DISCOUNT  ON  SALES 

Dr.  Cr. 

Monthly  with  \%  of  net  sales  (Cr.  At  end   of  period  balance  trans- 
Sales    Discount    Not    Taken    by  ferred  to  Profit  &  Loss 
Customers ) 


No  balance 


MERCHANDISE  DISCOUNT 


Dr.  Cr. 

From  Cash  Received  with  amounts  At  end  of  period  balance  trans- 
deducted  by  customers  on  account  ferred  to  Profit  &  Loss 
of  merchandise  discounts 


No  balance 


PURCHASE  DISCOUNT 


Dr.  Cr. 

From  Bank  Record  with  amounts 
deducted  on  account  of  discounts 
when  remitting  to  creditors 

At  the  end  of  the  period  this  account  is  debited  or  credited 
with  such  an  amount  as  will  adjust  the  balance  of  the  reserve  for 
discount  on  inventory  so  as  to  represent  ll/2%  of  the  inventory 
account.  It  is  also  debited  or  credited  with  such  an  amount  as 
will  adjust  the  reserve  for  discounts  on  accounts  payable  so  as 
tc  represent  1l/2%  of  the  accounts  payable  balance. 

No  balance 

SALES  DISCOUNT  NOT  TAKEN  BY  CUSTOMERS 

Dr.  Cr. 

With  the  discount  allowed  to  cus-  Monthly    with    1%    of    net    sales 

tomers  in  settlement  of  their  ac-  (Dr.  Cash  Discount  on  Sales) 
counts 

At  the  end  of  the  period  this  account  is  debited  or  credited 
with  such  an  amount  as  will  adjust  the  reserve  for  discount  on 
accounts  receivable  so  as  to  represent  1%  of  the  customers  debit 
balances. 

No  balance 


146      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

RESERVE  FOB  DISCOUNT  ON  ACCOUNTS  RECEIVABLE 

Dr.  (Jr. 

At  end  of  period  with  1%  of  cus- 
tomers debit  balances  (Dr.  Sales 
Discount  Not  Taken  by  Custom- 
ers) 

Balance  represents  amount  which  is  estimated  will  be  deducted 
by  customers  on  account  of  cash  discount  when  paying  the  bal- 
ances carried  at  the  end  of  the  period ;  this  balance  to  be  adjusted 
at  the  end  of  each  successive  period. 

RESEBVE  FOB  DISCOUNT  ON  MERCHANDISE  INVENTORY 

Dr.  Cr. 

At  end  of  period  with  \l/2%  of 
balance  in  merchandise  inventory 
account  (Dr.  Purchase  Discount) 

Balance  represents  amount  of  purchase  discounts  applicable 
to  merchandise  which  has  not  yet  been  liquidated  into  cash,  and  is 
therefore  not  taken  into  the  profits  of  the  period ;  this  balance  to 
be  adjusted  at  the  end  of  each  successive  period. 

RESEBVE  FOB  DISCOUNTS  ON  ACCOUNTS  PAYABLE 

Dr.  Cr. 

At  end  of  period  with  iya%  of 
creditors  credit  balances  (Cr.  Pur- 
chase Discount) 

Balance  represents  amount  of  purchase  discounts  taken  into 
profits  on  unpaid  creditors  balances;  balance  to  be  adjusted  at 
end  of  each  successive  period. 

The  journal  entries  making  the  adjustments  in  the  accounts 
above  outlined  are  as  follows: 


241  Cash  Discount  on  Sales 

263  To  Sales  Discount  Not  Taken  by  Customers 

1%  of  net  sales  for  the  period 
Net  Sales  = 

1% 

242  Merchandise  Discount 
21  To  Sales  Ledgers 

Merchandise  discount  deducted  by  customers 

111     Purchase  Ledger 

261  To  Purchase  Discount 

Discounts  deducted  when  remitting  to  creditors 


CLOSING  ENTRIES  147 

37     Reserve  for  Discount  on  Merchandise  Inventory 
261     Purchase  Discount 

37  To  Reserve  for  Discount  on  Merchandise  Inventory 

261  To  Purchase  Discount 

To  adjust  reserve  so  as  to  represent  lVa%  of  balance  in 
merchandise  inventory  account 
Balance  in  account  — 


27     Reserve  for  Discount  on  Accounts  Receivable 
263     Sales  Discount  Not  Taken  by  Customers 

27  To  Reserve  for  Discount  on  Accounts  Receivable 

263  To  Sales  Discount  Not  Taken  by  Customers 

To  adjust  reserve  so  as  to  represent  1%  of  debit  balances 
in  customers  accounts  subject  to  discount 
Debit  balances  in  customers  accounts  = 
1%    .  = 

261     Purchase  Discount 

117     Reserve  for  Discount  on  Accounts  Payable 

261  To  Purchase  Discount 

117  To  Reserve  for  Discount  on  Accounts  Payable 

To  adjust  reserve  so  as  to  represent  1%%  of  credit  bal- 

ances in  creditors  accounts 


CHAPTER  XVII 
THE  BOYLSTON  CLUB 

GENERAL  DISCUSSION 

The  principles  of  accounting  for  clubs  and  similar  organiza- 
tions are  practically  the  same  as  those  for  a  trading  concern. 
The  principal,  or  in  fact,  the  only  difference  is  that  the  club  is 
not  primarily  a  moneymaking  affair,  as  the  members  may  be 
considered  the  customers  of  the  enterprise. 

The  membership  of  the  Boylston  Club  is  between  four  and 
five  thousand.  It  is  a  social  organization  holding  public  meetings 
from  time  to  time. 

The  members  elect  annually  a  board  of  governors  from  which 
board  are  elected  a  president,  two  vice-presidents,  a  treasurer, 
secretary  and  an  executive  committee  of  fifteen.  The  president 
is  the  presiding  officer  at  all  meetings  and  has  the  appointing 
of  various  sub-committees,  all  the  members  of  which,  however,  are 
members  of  the  executive  committee.  These  officers  and  commit- 
tees serve  without  pay,  although  committees  are  allowed  sums 
each  year  to  cover  expenses. 

There  is  a  civic  secretary  appointed  by  the  executive  committee 
who  gives  his  entire  time  to  the  club  and  is  paid  a  salary.  The 
comptroller  and  manager  are  also  full  time  officers  drawing 
salaries. 

The  comptroller  is  in  charge  of  the  accounting  and  cost  de- 
partments. The  manager  is  in  charge  of  the  various  departments 
through  which  services  are  rendered  to  the  members. 

The  house  department  is  divided  into  two  sections,  general 
department  and  rooms  department.  The  chart  of  organization 
following  clearly  indicates  the  duties  of  each  executive  head. 


148 


THE  BOYL8TON  CLUB 


149 


MEMBERS  OF   THE    BOYL5TOM    CLUB 


Form  31 


CHAPTER  XVIII 

THE  BOYLSTON  CLUB 
FORMS 

Form  i  Purchase  Order. — The  purchase  order  used  in  the 
Boylston  Club  system  is  similar  to  that  used  by  the  Packford 
Auto  Sales  Company  shown  on  page  33.  It  is  made  out  in 
triplicate  by  the  clerk  in  charge  of  the  stores  department  and  is 
signed  by  the  manager.  The  purchases  are  divided  into  three 
main  classes  as  follows : 

1  General  Supplies 

2  Food  Supplies 

3  Purchases  by  Various  Committees 

General  supplies  include  three  classes  as  follows : 

(a)  Supplies  Used  in  the  Various  Departments,  such  as  linen 

and  glassware,  supplies  for  the  manager,  accounting 
department,  etc. 

(b)  Supplies  To  Be  Used  at  the  Bar 

(c)  Cigars 

These  purchases  originate  with  the  head  stores  clerk  who  is 
under  the  direction  of  the  manager.  The  purchase  order  blanks 
are  numbered  in  sets  of  three  by  the  printer.  When  the  order 
has  been  properly  made  out  by  the  head  stores  clerk  and  signed 
by  the  manager,  the  original  is  forwarded  to  the  vendor.  The 
duplicate  is  forwarded  to  the  comptroller,  and  the  triplicate  held 
by  the  clerk  as  his  record  of  supplies  ordered.  The  comptroller 
files  the  copy  sent  to  him  alphabetically,  according  to  creditors. 
The  invoice  when  received  by  the  comptroller  is  compared  with 
the  duplicate  purchase  order  which  is  removed  from  the  file 
at  this  time.  If  the  invoice  is  found  to  be  correct  it  is  filed  with 
the  purchase  order  attached  in  an  unfilled  invoice  file  to  await 
the  arrival  of  the  goods. 

The  goods  when  received  are  delivered  to  the  receiving 
department. 

Food  supplies  are  ordered  direct  by  the  steward  under  the 
direction  of  the  manager,  no  order  blank  being  made  out.  All 

150 


THE  BOYLSTON  CLUB 


151 


goods  are  delivered  to  the  receiving  department  with  a  memoran- 
dum. In  the  receiving  department  the  -goods  are  compared  with 
the  memorandum  and  those  of  a  permanent  nature  are  sent  to 
the  stores  department.  Those  of  a  perishable  nature  are  sent  to 
the  kitchen. 

At  the  end  of  the  day  all  memorandum  slips  are  sent  to  the 
manager's  office  where  after  an  inspection  is  made  they  are  sent 
to  the  comptroller  who  compares  the  memorandum  of  goods 
received  with  such  invoices  as  have  been  received  at  that  time 
and  arranges  the  bills  to  await  payment.  Where  bills  have  not 
been  received  the  memorandum  slips  are  filed  according  to 
creditors  to  await  the  arrival  of  the  bills. 

Ice  and  fuel  are  received  on  continuing  orders  covered  by 
monthly  bills  which  are  approved  by  the  manager  and  turned 
over  to  the  comptroller. 

Purchases  made  by  committees  do  not  usually  have  a  purchase 
order,  the  invoice  in  almost  every  instance  being  received  by  the 
committee  members  or  chairman.  The  invoice  bearing  the  ap- 
proval of  the  committee  is  passed  to  the  manager,  who  approves 
the  same  and  passes  it  to  the  comptroller  for  payment. 

In  the  receiving  department  when  clean  linen  is  received  from 
the  laundry  it  is  sorted  by  departments  and  compared  with  the 
laundry  memorandum,  then  distributed  to  the  departments.  The 
memorandum  slips  are  sent  through  the  manager's  office  to  the 
comptroller,  there  to  be  kept  on  file  until  the  bill  is  received  from 
the  laundry  and  comparison  of  the  bill  and  memorandum 
slips  made. 


Form  2 

Form  2  Stores  Requisition. — A  supply  of  this  form  is  fur- 
nished to  each  department,  the  only  difference  being  that  the 
heading  is  printed  with  name  of  the  department.  The  form 


152      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

which  is  used  to  remove  general  supplies  from  the  stores  depart- 
ment is  made  out  by  the  chief  clerk  of  the  department  requiring 
the  supplies,  in  duplicate ;  the  original  is  forwarded  to  the  stores 
department  and  the  duplicate  retained  by  the  clerk  as  his  record 
of  supplies  withdrawn. 

The  original  when  received  by  the  inventory  clerk  of  the  stock 
room  is  first  used  as  a  basis  for  delivering  the  supplies  to  the 
department  making  requisition.  After  the  goods  have  been  de- 


Received  from. 


.  tht  following  described  goods 


red  with   Invoice 


Form  3 

livered  and  signed  for,  the  inventory  clerk  fills  in  the  cost  in  the 
proper  space,  taking  the  information  from  his  inventory  card, 
form  25.  At  the  close  of  each  day  the  originals  are  sent  to  the 
accounting  department  where  they  are  filed  by  departments  until 
the  end  of  the  month.  At  the  close  of  each  month  the  requisi- 
tions received  in  the  accounting  department  are  totaled  and  form 
the  basis  of  a  journal  entry  charging  the  various  departments 
represented  by  ledger  accounts  120  to  127  inclusive,  130,  131, 
133,  140  and  141  and  crediting  the  various  inventory  accounts 
numbered  20  to  23  inclusive. 

Periodically  a  physical  inventory  is  taken  and  the  going  or 
perpetual  inventory  adjusted  in  accordance  therewith.  This 
adjustment  involves  general  ledger  accounts  20  to  23  inclusive, 
the  offsetting  debit  or  credit  being  to  the  departmental  operating 
accounts. 

Form  3     Goods  Received  Slip. — This  form  is  the  memoran- 


THE  BOYLSTON  CLUB 


153 


dum  made  out  in  the  receiving  department  in  duplicate  for  each 
lot  of  goods  received,  except  newspapers  and  food  supplies  de- 
livered direct  to  the  kitchen.  The  slips  are  numbered  consecu- 
tively in  sets  of  two.  The  original  is  sent  to  the  manager 's  office 


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and  then  to  the  comptroller.  The  duplicate  is  sent  to  the  stores 
clerk  in  order  that  he  may  make  the  necessary  entry  on  the 
inventory  card.  The  comptroller  compares  the  slip  with  the 
invoice  in  the  invoice  file  and  if  found  correct,  the  invoice  is 
approved  and  filed  ready  for  passing  through  the  voucher 
register. 


154      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


Form  4  Voucher  Jacket. — This  form  is  printed  on  both  sides, 
the  outside  being  ruled  and  printed  for  the  expense  distribution, 
the  inside  to  contain  a  summary  of  the  different  invoices. 

The  vouchers  are  numbered,  beginning  with  one  the  first  of 
each  month.  Approved  invoices  are  vouchered  three  times  each 
month,  the  10th,  20th  and  last  day  of  the  month.  Whenever 


rorm  H«-«-00 


192 


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Classification    Approved  by 


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Form  4   (Obverse) 

invoices  are  to  be  vouchered  they  are  arranged  according  to 
creditors  and  all  invoices  from  one  creditor  entered  on  a  voucher, 
form  4.  The  invoices  are  summarized  and  then  distributed  on 
the  outside  of  the  voucher. 

The  distribution  side  of  the  voucher,  form  4-R,  may  need  some 
slight  explanation.  Charges  to  asset  and  controlling  expense 
accounts  are  shown  in  the  left  hand  column  in  one  amount 
opposite  the  account  to  be  charged.  The  expenses  are  then 
listed  in  the  right  hand  column  showing  the  detail  of  the  various 
subsidiary  expense  accounts  to  be  charged.  The  theory  is  that 
each  item  is  shown  twice,  first  in  the  amount  column  representing 
the  charge  to  the  general  ledger  departmental  account,  then  in 
the  items  column  showing  amounts  to  be  charged  to  the  detailed 
subsidiary  expense  accounts. 

When  the  distribution  has  been  completed  the  voucher  is  in 
order  for  payment.  It  is  signed  by  the  bookkeeper  and  the 
distribution  is  approved  by  the  comptroller.  If  the  voucher  is 
paid  as  is  usually  the  case,  an  entry  is  made  in  the  check  register, 


THE  BOYLSTON  CLUB  155 

the  voucher  marked  in  the  proper  space  with  the  date  paid,  check 
number,  etc.,  and  filed  away  numerically.  If  however,  the 
voucher  is  not  paid  at  the  time  it  is  prepared  it  is  simply  listed 
in  the  voucher  register  and  filed  away  with  the  unpaid  vouchers 
awaiting  payment. 

Form  5  Voucher  Register. — The  pages  of  the  voucher  reg- 
ister are  numbered  beginning  with  one  each  month  and  constitute 
a  record  of  all  purchases  and  expenses.  The  entries  are  made 
from  the  approved  vouchers  before  the  checks  are  drawn.  Every 
entry  is  a  credit  to  vouchers  payable  in  the  column  so  headed 
and  the  amount  is  distributed  through  the  various  debit  columns 
as  indicated  by  the  accounts  shown  on  the  voucher  jacket.  The 
accounts  on  the  voucher  jacket  have  corresponding  columns  in 
the  voucher  register  or  in  the  event  that  a  special  column  is  not 
provided  the  amount  is  entered  in  the  sundry  debits  column, 
showing  the  number  of  the  account  so  charged. 

The  date  paid  and  check  number  are  entered  when  the  check 
is  drawn.  No  individual  accounts  are  kept  with  creditors,  the 
unpaid  items  in  the  voucher  register  representing  the  balance 
of  the  vouchers  payable  account  in  the  general  ledger.  At 
the  close  of  each  month  the  voucher  register  is  footed  and  the 
equality  of  debits  and  credits  proved.  The  special  columns 
are  posted  in  total  to  their  corresponding  ledger  accounts.  The 
sundry  column  is  posted  in  detail  or  may  be  analyzed  and  one 
posting  made  to  each  account. 

The  accounts  ordinarily  charged  through  the  sundry  debits 
column,  that  is  those  not  provided  with  a  special  column,  are  as 
follows : 

32  General  house  furnishings 

33  Rooms  furnishings 

34  Paintings,  books  and  bric-a-brac 

35  Accounting  department  furniture  and  fixtures 

36  Restaurant  furniture  and  fixtures 
40  Bar  furniture 

42  Cigar  counter  and  fixtures 

43  Billiard  and  pool  room  equipment 

44  Barber  shop  equipment 

45  Bowling  alleys  equipment 

46  Newspaper  and  periodical  counter  and  equipment 

47  Machinery 

"When  purchases  are  made  which  are  intended  to  increase  the 
permanent  supply  of  china,  glass  ware,  etc.,  the  following  ac- 
counts would  be  charged  through  the  sundry  debits  column : 


156      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


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THE  BOYLSTON  CLUB  157 

37  Restaurant  china  and  glass  ware 

38  Restaurant  linen 

39  Restaurant  silver  and  cutlery 
41  Bar  glass  ware 

Form  6  Voucher  Index  Card. — This  form  is  intended  to  be 
used  to  locate  vouchers  covering  invoices  from  any  particular 
creditor.  It  is  the  same  general  form  as  shown  with  the  Pack- 
ford  Auto  Sales  Company  system  and  is  arranged  in  the  file 
alphabetically  according  to  creditors. 

Form  7  Analysis  of  Departmental  Expenses. — A  section  of 
this  record  is  set  aside  for  each  department  and  in  the  proper 
space  at  the  top  of  the  sheet  the  department  name  is  entered, 
as,  restaurant,  bar,  cigars,  billiards  and  pool,  rooms,  barber 
shop  and  bootblack,  bowling,  newspapers  and  periodicals,  gen- 
eral house  expenses  and  committee  expenses. 

When  an  entry  is  made  in  the  voucher  register  charging  any  of 
the  departmental  expense  controlling  accounts  in  the  general 
ledger,  ]20  to  127  inclusive,  140  and  141,  an  entry  must  also 
be  made  in  the  analysis  of  departmental  expenses,  form  7,  in 
the  corresponding  section.  The  date,  voucher  number,  and 
amount  of  voucher  are  entered  in  the  columns  so  headed.  The 
columns  to  the  right  of  the  amount  column  are  headed  with 
the  numbers  of  the  subsidiary  accounts  under  each  main  group, 
as,  for  example,  in  the  case  of  account  120,  the  headings  of 
the  columns  will  be  1,  2,  3,  etc.,  corresponding  with  the  sub- 
sidiary departmental  expense  accounts  shown  on  pages  185  to 
187  inclusive,  subsidiary  account  number  1  being  food  supplies 
used;  2,  salaries;  3,  board  of  employees;  etc. 

At  the  close  of  the  month  the  book  is  footed  by  departments 
and  the  distribution  proved  with  the  total. 

It  will  be  noted  that  all  of  the  subsidiary  accounts  in  each 
group  would  not  be  charged  through  the  voucher  register,  some 
of  the  debits  originating  in  the  journal.  The  accounts  which 
would  ordinarily  be  charged  from  the  voucher  register  in  each 
group  are  as  follows: 

120 — 4,  6,  7,  11,  12,  13,  19 

121—4,  6,  9,  10,  16 

122 — 4,  10 

123—3,  4,  5.  11 

124—6,  7,  13 

125—5,  7,  13 

126 — 4,  5,  11 

127—1,  4,  10 

140—5,  6,  7,  10,  11,  12,  13,  16 

141—1,  2,  3,  4,  5,  6,  7 


158      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


ANALYSIS  OF  DEPARTMENTAL  EXPENSES 
DEPARTMENT  MONTH  OF  192 

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THE  BOYLSTON  CLUB  159 

The  information  entered  on  the  form  is  used  in  connection 
with  the  preparation  of  the  monthly  operating  statements  of 
the  departments. 

Form  8  Cash  Received. — The  sheets  are  written  up  each 
day  and  are  numbered  as  used,  beginning  with  one  the  first 
of  each  month.  All  funds  received  are  deposited.  The  columns 
are  used  as  follows : 

Form  of  remittance  is  intended  to  show  whether  the  amount 
received  is  in  cash,  check,  money  order,  express  order,  etc. 
The  "debit  cash"  column  is  for  the  total  amount  received,  and 
at  the  close  of  the  month  the  footing  of  this  column  is  posted 
to  the  debit  of  account  1. 

The  other  columns  on  the  form  are  all  credits  and  are  used 
to  distribute  the  remittances  received. 

Column  headed  "members  house  accounts"  is  for  entering 
collections  of  current  house  charges.  It  is  posted  in  detail  to 
the  accounts  in  the  members'  ledger  and  at  the  close  of  the 
month  the  total  is  posted  to  the  credit  of  account  4  in  the 
general  ledger. 

The  column  headed  "members'  annual  dues"  is  for  amounts 
paid  in  settlement  of  dues  received  in  the  month  in  which  they 
fall  due.  The  amounts  are  posted  in  detail  to  the  members' 
cards,  forms  28  and  29,  and  at  the  close  of  the  month  the  total 
is  posted  to  the  credit  of  account  80  in  the  general  ledger. 

The  column  headed  "members'  assessments"  is  used  for 
amounts  received  on  account  of  assessments  paid  during  the 
month  in  which  they  fall  due.  The  amounts  are  posted  in 
detail  to  forms  28  and  29,  and  at  the  close  of  the  month  the 
total  is  posted  to  the  credit  of  account  87. 

The  column  headed  "initiation  fees"  is  for  entering  such 
fees  when  received,  and  at  the  close  of  the  month  the  total 
is  posted  to  the  credit  of  account  90. 

The  column  headed  "employees'  benefit  fund"  is  used  for 
entering  amounts  which  are  received  to  apply  on  this  account. 
At  the  close  of  the  month  the  total  is  posted  to  the  credit  of 
account  88. 

It  may  be  stated  at  this  time  that  when  the  amount  is  con- 
siderable, or  in  any  event  at  the  close  of  the  month,  a  check 
is  drawn  for  the  total  amount  of  this  column  and  turned  over 
to  the  trustees  of  the  employees'  benefit  fund.  This  transac- 


160      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

tion  operates  to  credit  cash,  the  offsetting  debit  being  to  em- 
ployees' benefit  fund,  account  17. 

The  column  without  a  heading  may  be  used  for  any  account 
for  which  a  large  number  of  entries  are  received  and  is  headed 
as  needed. 

The  private  ledger  column  is  to  be  used  for  any  account  not 
covered  by  the  special  columns,  the  accounts  for  which  it  is 
most  used  being  5  and  6.  At  the  close  of  the  month  the  column 
is  posted  in  detail  to  the  credit  of  the  corresponding  ledger 
accounts,  or,  it  may  be  analyzed  and  one  posting  made  for 
each  account. 

Cash  sales  column  is  for  entering  the  total  amount  received 
from  cash  sales  as  shown  by  the  report  from  the  bookkeeping 
department,  and  is  the  actual  cash  sales  regardless  of  the 
amount  of  cash  taken  in. 

The  two  columns  at  the  extreme  right  of  the  page  headed 
"cash  variations — over-under"  are  to  be  used  for  entering  the 
difference  between  the  actual  cash  sales  as  entered  in  the  pre- 
ceding column  and  the  amount  of  cash  collected,  the  purpose 
being  to  determine  the  amount  of  variation  in  the  cashier's  cash 
during  each  month.  At  the  close  of  the  month  the  total  of  the 
cash  sales  is  posted  to  the  credit  of  account  150.  At  the  close 
of  the  month  two  postings  may  be  made  to  the  cash  variation 
account,  144,  or  the  net  difference  between  the  columns  may  be 
determined  and  only  one  posting  made. 
Form  9  Currency  Voucher 
Form  10  Voucher  Check 

Are  the  ordinary  currency  or  petty  cash  voucher  and  the 
voucher  check.  The  forms  are  not  shown  and  no  particular 
explanation  seems  to  be  necessary  as  a  sample  voucher  is  in- 
cluded with  the  Packford  Auto  Sales  Company  system  and 
full  details  of  operation  are  outlined. 

Form  ii  Check  Register. — The  sheets  are  numbered  each 
month  and  are  written  up  by  the  cashier  under  the  direction 
of  the  comptroller.  It  is  intended  that  the  check  register  will 
be  operated  as  a  record  of  cash  disbursements,  and  also  as  a 
bank  statement.  The  columns  are  used  as  follows: 

The  column  headed  "particulars"  is  not  ordinarily  used,  but 
is  intended  for  describing  special  items  which  are  not  posted 
through  the  voucher  register,  such  as  allowances  or  discounts 


THE  BOYLSTON  CLUB 


161 


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162      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

of  an  unusual  nature,  and  for  all  cases  where  "particulars"  are 
desirable. 

The  "check  no."  and  "voucher  no."  columns  are  self-explan 
atory. 

The  total  amount  of  the  check  is  entered  in  the  credit  column 
so  headed  and  at  the  close  of  the  month  the  total  of  this  column 
is  posted  to  the  credit  of  account  1. 

The  discount  on  any  account  paid  is  entered  in  column  so 
headed  and  at  the  close  of  the  month  the  total  of  the  column 
is  posted  to  the  credit  of  account  160. 

The  column  headed  "vouchers  payable"  is  to  be  used  for 
entering  payments  of  items  which  are  covered  by  vouchers  and 
would  be  the  sum  of  the  amount  of  check  and  the  discount 
columns.  At  the  end  of  each  month  the  footing  of  this  column 
is  posted  to  the  debit  of  account  60. 

The  column  headed  "members'  ledger"  is  not  ordinarily  used 
as  very  few  payments  to  members  are  made.  In  the  event  that 
a  payment  should  be  made  the  column  would,  of  course,  be 
posted  in  detail  to  the  members'  accounts  in  the  members' 
ledger,  and  at  the  close  of  the  month  the  total  of  the  column 
would  operate  as  a  debit  to  account  4. 

The  column  headed  "private  ledger"  is  used  for  checks  issued 
in  payment  of  items  not  passed  through  the  voucher  register, 
such  as  a  transfer  of  cash  to  accounts  15,  16  and  17.  The 
items  appearing  in  the  column  at  the  close  of  the  month  are 
posted  in  detail  to  the  debit  of  their  corresponding  general 
ledger  accounts. 

The  three  columns  at  the  extreme  right  of  the  page  are 
for  the  bank  statements.  The  deposits  are  entered  daily  from 
the  cash  received  sheet,  form  8,  which  is  the  amount  of  cash 
received  for  the  day.  The  withdrawals  column  is  used  for 
the  checks  drawn  during  the  day  as  shown  by  the  entries  in 
the  amount  of  check  column.  The  balance  is  determined  by 
adding  to  the  balance  at  the  close  of  the  previous  day  the 
deposits  for  the  current  day,  and  deducting  the  withdrawals. 
This  balance  should  agree  with  the  balance  of  account  1  in  the 
general  ledger,  which  at  the  close  of  the  month  should  be 
reconciled  with  the  statement  received  from  the  bank. 

Sales  Records. — The  forms  used  by  all  of  the  departments  for 
recording  sales  are  similar  as  will  be  noted  by  referring  to  the 


THE  BOYLSTOX  CLUB  163 

various  samples  on  the  succeeding  pages  and  the  system  is  in  a 
general  way  the  same  in  each  department.  Wherever  differences 
occur,  they  will  be  explained  in  detail. 

The  sales  tickets  for  each  department  are  printed  in  different 
colors  and  have  a  different  series  of  numbers. 

Form  12-3  Restaurant. — When  a  meal  is  ordered  the  member 
makes  out  and  signs  the  sales  ticket  in  duplicate.  As  the  waiter 
goes  into  the  kitchen  he  passes  a  checker,  to  whom  he  gives  both 
copies.  The  checker  numbers  the  tickets,  starting  with  one  each 
day,  and  returns  the  original  to  the  waiter,  retaining  the 
duplicate.  The  waiter  gives  the  original  sales  ticket  to  the  chef, 
and  when  the  order  has  been  filled  he  stops  at  the  checker's  desk 
and  the  items  on  the  tray  are  compared  with  the  duplicate  sales 
ticket  held  by  the  checker. 

If  the  check  is  to  be  paid  in  cash,  the  waiter  takes  the  cash 
to  the  checker  in  charge  of  the  cash  register  and  marks  the 
sales  ticket  "cash." 

The  original  sales  tickets  are  sent  by  the  chef  in  the  kitchen 
to  the  general  manager's  office  at  the  close  of  each  day,  where 
they  are  inspected  and  then  forwarded  to  the  bookkeeping  de- 
partment. 

In  the  bookkeeping  department  the  tickets  are  sorted  into 
two  groups,  representing  charge  sales  and  cash  sales,  and  each 
.group  is  listed  on  an  adding  machine  showing  sales  in  each 
class  each  day. 

The  duplicate  tickets  which  are  retained  by  the  checker  are 
listed  by  him  on  form  13-a,  of  which  there  are  three  sets,  series 
1  to  250,  251  to  500,  and  one  lot  in  blank. 

The  sheets,  form  13-a,  are  totaled  by  the  checker  and  sent 
to  the  bookkeeping  department  at  the  close  of  each  day,  where 
the  totals  are  compared  with  the  total  of  the  original  sales 
tickets  determined  by  the  adding  machine  list,  and  any  varia- 
tions are  located  and  adjusted. 

The  duplicate  sales  tickets  are  filed  away  by  the  checker  in 
bundles  for  each  day,  the  bundles  being  retained  for  three 
months,  after  which  they  are  destroyed. 

The  check  sheets  are  filed  in  the  bookkeeping  department,  the 
sheets  from  each  department  being  kept  separate. 

The  total  of  the  sales  as  determined  from  the  check  sheets 


164      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


and  verified  by  the  sales  tickets  is  made  the  basis  of  an  entry 
in  the  record  of  daily  business,  form  17,  which  operates  to  credit 
the  various  sales  accounts  and  to  debit  account  4  for  charge 


BOYLSTOM    CLUB 


RESTAURANT 


WAITER  Ho  . 


.CLUB    LOMCHEOHS 
.CLUB    DIMMERS 


MEMBER   SIGH  HERE 


BOYLSTOM  CLUB 
RESTAURANT 

NO                                                WAITER  NO 
DATE   . 


GRILL   ROOM 


MEMBERS  SIGH  HERE 


Form  12A 


Form  12B 


BOYLSTOM  CLUB 

BOYLSTOM  CLUB 

RESTAURAMT 

WAITER   MO 

BAR 
WAITER  No. 

DA 

Nr>                            Dote 

EMPLOYEES'  TABLE, 

POPTM 

'  ^^  J 



-^1_—  —  ^r;  ^ 

r  1 

1  •  —  . 

""     ^mn^^  —  i 

HEMBER  SIOM    HERE 

TOTAL 

Mr 

SIGH  HERE 

For 

m  Mo  IZ-C 

Fo«m  HO  IZ-d 

Form  12c 


Form  12o 


sales  and  account  150  for  cash  sales.    For  a  description  of  form 
17  see  page  170. 

The  charge  sales  tickets  are  turned  over  to  the  bookkeeper 


THE  BOYLSTON  CLUB  165 

in  charge  of  the  members'  ledger  for  posting  in  detail  to  the 
debit  of  the  members'  house  accounts. 

The  cash  sales  tickets  and  adding  machine  tape  are  turned 
over  to  the  cashier  to  assist  him  in  making  the  cash  book  entry 
and  reconciling  with  the  amount  of  cash  received  from  the  cash 
registers. 

The  original  sales  tickets  are  retained  in  the  bookkeeping 
department  for  three  months  and  then  destroyed. 

Form  i2-b  Grill  Room. — This  sales  ticket  is  used  in  the 
grill  room,  the  system  being  the  same  as  for  the  restaurant, 
described  under  12-a. 

Form  i2-c  Employee's  Table. — The  various  employees  of 
the  club  receive  their  meals  at  the  restaurant,  if  desired,  with- 
out charge.  The  sales  ticket,  form  12-c,  is  made  out  in  dupli- 
cate in  the  same  way  as  for  members,  but  in  addition  the 
name  of  the  department  where  the  person  is  employed  is  also 
shown.  The  waiter  has  the  tickets  numbered,  and  the  checker 
retains  the  duplicate  as  in  the  case  of  a  paying  member. 

The  original  is  forwarded  to  the  kitchen,  where,  at  the  end 
of  the  day,  it  is  sent  to  the  manager's  office  for  inspection,  then 
to  the  bookkeeping  department,  where  the  various  tickets  are 
sorted  by  departments  and  listed  on  the  adding  machine.  The 
adding  machine  lists  are  arranged  to  show  the  total  for  each 
department,  and  the  grand  total  of  all  departments. 

The  duplicate  sales  tickets  are  listed  on  a  separate  check 
sheet  by  the  checker.  Each  sheet  is  totaled  and  sent  to  the 
bookkeeping  department,  where  it  is  compared  and  reconciled 
with  the  adding  machine  total  of  all  departments. 

The  original  tickets  and  the  adding  machine  tape  are  filed 
away  until  the  end  of  the  month,  when  a  summary  is  pre- 
pared which  forms  the  basis  of  a  journal  entry  charging  the 
various  operating  departments,  and  crediting  the  restaurant 
revenue,  account  100,  for  the  meals  of  employees.  The  check 
sheets  are  filed  away  with  the  other  restaurant  check  sheets. 

Form  i2-d  Bar. — While  the  general  system  for  handling 
sales  at  the  bar  is  much  the  same  as  for  food  sold  in  the  restau- 
rant, a  somewhat  different  manner  of  treatment  is  necessary 
for  part  of  the  sales  inasmuch  as  some  are  at  the  bar  and  others 
are  at  the  tables  in  the  restaurant. 

When  sales  are  made  at  the  bar  the  clerk  in  charge  makes 


166      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


out  a  sales  ticket  in  duplicate.  Both  copies,  which  have  been 
signed  by  the  member,  are  passed  to  the  checker,  where  they 
are  numbered  beginning  with  1  each  day.  The  original  is  re- 
turned to  the  clerk  in  charge  of  the  bar  and  the  duplicate  is 
listed  by  the  checker  on  his  check  sheet. 

If  the  sale  is  for  cash,  both  copies  of  the  sales  ticket  are 
stamped  "cash"  and  the  amount  of  sale  is  rung  up  in  the  cash 
register. 

For  sales  made  at  the  restaurant  the  waiter  goes  to  the  bar 
clerk,  who  makes  out  the  ticket  and  the  member's  signature  is 


BOYLSTOM    CLUB 


CIGARS 


WAITER  Ha 
MO- 


MEHBERSSIGM  HERE. 


Mr. 


BOYLSTOn  CLUB 

ROOMS 


Date 


ROOM  Ma. 


.DAYS 
.WEEKS 
.  MONTHS 


SIGH  HERE 


Form  12E 


Form  12o 


obtained  by  the  waiter,  who  delivers  the  duplicate  to  the  bar 
checker  and  the  original  to  the  clerk  in  charge  of  the  bar. 

With  this  slight  variation  in  the  preparation  of  the  sales 
ticket,  the  routine  is  the  same  as  for  the  restaurant  tickets.  The 
entry  in  the  record  of  daily  business,  form  17,  operates  to 
credit  account  101  and  debit  account  4  for  charge  sales  and  150 
for  cash  sales. 

Form  i2-e  Cigars. — In  handling  charge  sales  at  the  cigar 
counter  the  routine  of  making  out  sales  tickets  is  the  same  as 
at  the  bar,  the  originals  being  forwarded  to  the  bookkeeping 


THE  BOYLSTON  CLUB    '  167 

department,  where  they  are  totaled  and  compared  with  the 
check  sheet  which  is  made  out  by  the  head  cigar  clerk,  there 
being  no  checker. 

For  cash  sales  no  tickets  are  made,  the  amount  of  the  sale 
being  passed  through  the  cash  register. 

The  sales  at  the  cigar  counter  are  checked  each  day  by  the 
cashier  and  reported  to  the  bookkeeping  department,  where  an 
entry  is  made  in  the  record  of  daily  business,  form  17,  which 
operates  to  credit  account  102  and  charge  accounts  4  and  150. 

Form  i2-f  Billiards  and  Pool. — The  sales  tickets  in  the  bil- 
liard room  show  in  addition  to  the  regular  information  the  num- 
ber of  the  table  and  are  also  provided  with  a  space  for  insert- 
ing a  timeclock  stamp. 

These  sales  tickets  are  not  made  in  duplicate. 

The  tickets  are  signed  by  the  member,  or  in  the  event  of  pay- 
ment being  received  in  cash  the  sales  ticket  is  marked  "cash" 
and  the  amount  received  rung  up  in  the  cash  register. 

At  the  close  of  each  day  the  check  sheet  is  prepared  by  the 
clerk  in  charge  of  the  billiard  room. 

The  tickets  for  this  department  are  numbered  by  the  printer ; 
the  check  sheets  have  no  numbers,  the  same  being  entered  by  the 
clerk  as  he  uses  the  sales  tickets,  and  it  is  the  duty  of  the 
bookkeeping  department  to  see  that  all  sales  tickets  are  accounted 
for  either  as  charge  or  cash  sales. 

From  this  point  the  routine  of  handling  is  the  same  as  in  other 
departments. 

Form  i2-g  Rooms. — The  sales  ticket  for  rooms  is  made  up 
whenever  a  member  vacates  a  room  and  is  signed  at  that  time. 
These  tickets  are  not  made  in  duplicate  and  at  the  end  of  each 
day  the  check  sheet  is  made  up  by  the  head  room  clerk.  Each 
ticket  is  listed  on  the  check  sheet  and  handled  as  in  the  other 
departments. 

If  a  member  is  to  occupy  a  room  permanently  he  is  rendered 
a  bill  at  the  end  of  the  month  and  at  that  time  is  asked  to  sign 
the  sales  ticket. 

Form  i2-h  Barber  Shop. — The  sales  tickets  from  the  barber 
shop  are  handled  in  the  same  way  as  sales  tickets  at  the  bar.  The 
routine  of  accounting  is  the  same  as  for  all  other  departments. 

Form  i2-i  Bowling. — The  sales  tickets  in  the  bowling  alleys 
are  prepared  in  the  same  way  as  the  billiard  room,  one  copy 


168      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


of  the  sales  ticket  being  made  out  from  the  tally  sheet  and 
signed  by  the  member.  The  numbers  are  printed  on  the  sales 
tickets  and  the  bookkeeping  department  verifies  the  fact  that 
all  numbers  have  been  accounted  for. 


THE  BOYLSTON  CLUB 


169 


Form  i2-j  Newspapers  and  Periodicals. — The  sales  tickets 
at  the  news-stand  are  handled  the  same  as  the  sales  tickets  at 
the  bar.  The  routine  of  accounting  is  the  same  as  for  other 
departments. 

Form  13-3  Restaurant  Check  Sheet. — The  check  sheet  forms 
have  been  described  in  connection  with  the  sales  tickets  so  that 
no  further  detail  seems  necessary,  except  a  general  review  of  the 
form  in  order  that  we  may  be  familiar  with  its  outline. 

The  form  of  check  sheet  in  each  department  is  the  same,  except 
where  the  sales  tickets  have  been  numbered  by  the  printer  when 
the  check  sheets  do  not  show  numbers. 

Form  14  Room  Register. — This  form  is  the  ordinary  hotel 
register,  having  space  provided  for  the  signature,  membership 
number,  room  number,  date  when  the  room  was  taken,  and 
date  when  vacated. 

The  rooms  may  be  taken  by  the  day,  week  or  month,  and 
whenever  a  room  is  occupied  by  a  member,  a  room  index  card, 
form  15,  is  prepared. 


BOYLSTOrt      CLUB 
ROOn       INDEX      CARD 
ROOM   Mo     


RATE  PER      WEEK. 


MONTH 


NAME 


MEMBERSHIP   Mo.    

DATE     OCCUPANCY    BEGAN 


DATE     OCCUPAMCY  ENDED 


TOTAL  TIME 

TOTAL  CHARGC  *. 


Form  15 


Form  15  Room  Index  Card. — This  form  is  made  out  when- 
ever a  room  is  rented  and  if  it  is  to  be  occupied  permanently 
the  rate  per  week  or  per  month  is  inserted. 

The    cards   are   kept   in   the   room   rack   at   the   main   desk, 


170      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

there  being  a  space  provided  in  the  rack  for  each  room;  the 
vacant  spaces  in  the  rack  indicate  rooms  not  occupied. 

When  a  member  vacates  a  room  the  index  card  is  removed 
and  the  rooms  charge  ticket,  form  12,  is  prepared  for  his  signa- 
ture. The  amount  of  the  charge  entered  on  the  sales  ticket  is 
the  same  amount  as  shown  at  the  bottom  of  form  15. 

Form  16  Housekeeper's  Daily  Report. — The  daily  report 
prepared  by  the  housekeeper  is  forwarded  to  the  bookkeeping 


HOUSEKEEPER'S  REPORT 
ROOMS  MOT  OCCUPIED   . 

FIFTH  FLOOR 


SIXTH  FLOOR 


SEVENTH  FLOOR 


EIGHTH  FLOOR 


Form  16 

department  and  operates  as  a  check  on  the  actual  business  done 
in  the  rooms  department. 

The  report  is  submitted  each  morning  and  shows  the  rooms 
not  occupied.  It  is  checked  with  the  room  rack  at  the  main 
desk  by  the  bookkeeper  and  compared  with  the  sales  tickets  for 
rooms  turned  in  by  the  rooms  department  clerk. 

Form  17  Record  of  Daily  Business. — Two  sheets  are  used 
each  month,  one  for  recording  the  summary  of  the  cash  sales 
in  each  department  and  one  for  recording  the  charge  sales. 

The  original  charge  sales  tickets  from  each  department  and 
the  original  cash  sales  tickets  from  each  department,  except 
cigars,  barber  shop  and  papers,  are  delivered  to  the  bookkeeping 
department  each  morning.  Cash  sales  of  cigars,  barber  shop  and 
newspapers  are  reported  by  the  cashiers. 

The  sales  tickets  are  listed  on  the  adding  machine  showing 
the  total  cash  sales  and  the  total  charge  sales  in  each  depart- 
ment. These  totals  are  compared  with  the  check  sheets  received 
from  the  various  departments  and  the  differences  reconciled. 
The  amounts  on  the  adding  machine  tape  then  form  the  basis 


THE  BOYLSTON  CLUB 


171 


for  two  entries,  one  on  each  record  of  daily  business  sheet ;  one 
operates  to  credit  accounts  100  to  107  inclusive,  representing 


the  revenue  accounts  of  the  different  departments,  and  charging 
account  4  for  the  charge  sales,  the  other  covering  cash  sales, 
credits  the  same  revenue  accounts  but  charges  account  150. 

At  the  close  of  each  month  form  17  is  footed  and  the  total  of 
each  column  posted  as  above. 

After  the  daily  entry  is  made  in  this  form  the  cash  sales 
slips  are  sent  to  the  cashier,  where  they  are  retained  for  three 


172      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

months  and  then  destroyed.  The  charge  sales  slips  are  turned 
over  to  the  bookkeeper  for  posting  to  the  debit  of  the  members' 
accounts  in  the  members'  ledger. 

Form  18  Members'  Daily  Charges. — The  daily  charge  sales 
to  members  average  from  350  to  550  items.  Form  18  is  printed 
on  card  stock  and  is  intended  to  be  used  for  accumulating  the 
daily  charges  to  members.  A  column  is  provided  on  the  card 


Form  18   (Obverse) 


Form  18   (Reverse) 

for  each  month  and  the  days  of  the  month  are  indicated.  A 
new  card  is  made  out  at  the  beginning  of  each  year. 

The  sales  tickets  when  received  by  the  bookkeeper  are  sorted 
alphabetically  according  to  members,  then  each  member's  tickets, 
if  more  than  one  in  a  day  for  a  member,  are  totaled  and  the 
total  entered  on  his  card,  form  18,  which  is  arranged  alpha- 
betically. 

The  postings  are  proved  each  day  in  order  to  avoid  the 
necessity  of  rechecking  the  large  number  of  accounts  to  obtain 
a  trial  balance.  The  method  of  proving  is  as  follows: 

While  the  postings  are  being  made  the  cards  are  set  out 
from  the  file  and  after  the  posting  has  been  completed  the 
cards  to  which  postings  have  been  made  are  gone  over  and 


THE  BOYLSTON  CLUB 


173 


the  total  postings  for  the  day  listed  on  the  adding  machine. 
This  total  is  compared  and  reconciled  with  the  total  of  the 
charge  sales  tickets  as  shown  by  the  check  sheet,  and  the  adding 
machine  tape  from  the  tickets  themselves. 

At  the  close  of  the  month  the  charges  during  the  month  are 
totaled  and  that  total  posted  from  the  card  to  the  debit  of  the 
members'  account  in  the  members'  ledger. 

Form  19  Members'  Ledger. — The  members'  ledger  is  a  loose 
leaf  book  arranged  alphabetically,  the  form  being  worked  in  two 


HEinBERS'   LES6ER 

MAME 

ADDRESS 

vj 

DUES     AMD      ASSESSMENTS 

HOUSE    CHARGES 

DATE 

ra. 

DEBITS 

DATE 

rot 

CRUl 

TS 

DATE 

FOL 

DEBITS 

DATE 

TO. 

CRtDITS 

J 

•01 

^ 

^~~_ 

t=» 

—  •  —  * 

—  —  ' 



—  .. 

^       -• 

^ 

•> 

^^— 

' 

^- 

Form  19 

sections,  one  of  which  is  for  posting  dues  and  assessments  and 
the  other  for  house  charges. 

The  entries  in  the  dues  and  assessments  section  are  taken 
from  the  membership  expiration  index,  form  28,  and  the  directory 
of  members,  form  29.  The  credits  are  from  the  cash  receipts 
book. 

The  entries  in  the  house  charges  section  of  the  ledger  are 
posted  from  the  daily  charges  cards,  form  18,  once  each  month. 
The  credits  are  obtained  from  the  cash  receipts  book. 

At  the  end  of  each  month  the  members'  accounts  are  balanced 
and  a  trial  balance  drawn  off,  which  should  agree  with  the 
balance  of  account  4  for  house  accounts,  5  for  dues,  and  6  for 
assessments. 

The  trial  balance  book  for  this  ledger,  form  20,  is  provided 
with  three  columns,  one  corresponding  to  each  controlling 
account. 

Form  20  Trial  Balance  Book  for  Members'  Ledger. — This 
book  is  provided  with  short  sheets  so  as  to  avoid  the  necessity 
of  rewriting  the  members  names  more  than  once  a  year. 

The  trial  "balance  is  drawn  off  at  the  close  of  each  month 
from  the  members'  ledger,  form  19,  and  the  totals  of  the  columns 


174      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


THE  BOYL8TON  CLUB 


175 


proved  with  the  balance  of  the  controlling  accounts  in  the  gen- 
eral ledger. 

Form   21     Members'    Monthly   Bill. — The   monthly   bill   to 
members  is  prepared  from  the  members'  ledger  and  whenever 


THE  BOYLSTON  CLUB 


MR. 


Ho. 


House   CHARGES   PREVIOUSLY  RENDERED i>_ 

HOUSE  CHARGES  FOR    CURRENT    MOUTH     _.._ *_ 

ANNUAL  DUES  To. .&_ 


TOTAL 


Members  slips  may  be  obtained  from  the  Cashier  upon 
request    on  payment  of  this  occount 


If  payment  is  mode  by  moil,  detach  this  stub  and  send  with 
thecU  to  Ihe  Boy  Iston  Club 
Mo.     • 


HOUSE  CHARGES   PREVIOUSLY  RENDERED 
House  CHARGES   FOR  CURRENT  MONTH 
ANNUAL  DUES 


TOTAL 


Form  21 

dues  expire  in  the  current  month,  from  the  expiration  index, 
form  28. 

When  the  bill  is  paid  the  stub  is  used  as  a  memorandum  for 
entering  payment  in  the  cash  book. 

Assessments  are  not  billed  on  this  form,  but  a  special  notice 
is  mailed  and  a  receipt  given  for  the  payment  on  an  ordinary 
receipt  form.  If,  however,  an  assessment  is  unpaid  at  the  close 
of  the  month  in  which  made,  it  is  added  to  the  bill. 

In  the  event  that  amounts  due  from  members  are  not  paid 


at  the  end  of  three  months,  a  journal  entry  is  made  charging 
account  84  for  unpaid  dues,  and  85  for  unpaid  assessments, 
and  crediting  accounts  5  and  6  in  the  general  ledger,  and  the 
members'  account  in  the  members'  ledger.  The  member,  of 
course,  is  deprived  of  his  membership  privileges  if  it  is  necessary 
to  cancel  charges  against  him. 

Form  22  Journal. — The  journal  used  in  this  system  is  in 
two  separate  books,  the  first  being  an  ordinary  two-column 
journal,  and  containing  only  correcting  and  closing  entries. 

The  second  book  is  form  22,  which  is  intended  to  carry  the 
monthly  adjusting  entries.  This  form  is  provided  with  short 
sheets  so  as  to  obviate  the  necessity  of  rewriting  the  entries  from 
month  to  month,  and  each  entry  is  so  arranged  that  it  may  be 
used  as  either  a  debit  or  credit  to  the  accounts  affected. 

Form  23  Payroll  Book. — A  section  of  the  payroll  book  is  re- 
served for  each  operating  department,  and  also  for  the  depart- 
ments represented  by  general  ledger  controlling  accounts  130, 
131  and  140. 

Whenever  a  man  enters  the  employ  of  the  club  a  memorandum 
is  sent  by  the  head  of  the  department  to  the  bookkeeper.  Each 
day  a  list  is  sent  to  the  bookkeeper  showing  the  employees  absent, 
and  when  the  payroll  is  prepared,  the  total  number  of  days 
absent  during  the  week  is  entered  in  the  proper  column.  The 
payroll  is  prepared  each  Saturday  morning,  and  includes  the 
time  up  to  the  previous  Thursday  morning.  The  columns  are 
used  as  follows: 

The  rate  per  day,  week  or  month  is  inserted  in  the  rate 
column,  and  if  the  employee  is  a  member  of  the  benefit  associa- 
tion the  amount  which  he  is  to  pay  to  the  fund  each  week  is 
entered  in  the  column  headed  "benefit  fund."  The  columns  to 
this  point  are  general  information,  and  as  the  book  is  provided 
with  short  sheets,  it  is  unnecessary  to  repeat  the  information 
from  week  to  week. 

When  the  payroll  is  being  made  up  the  date  is  inserted  at 
the  head  of  the  column ;  the  days  absent,  as  shown  by  the  daily 
reports,  entered  opposite  the  employee's  name;  the  total  salary 
which  is  to  be  drawn  is  entered  in  the  total  column ;  the  amount 
of  his  weekly  contributions  to  benefit  fund  is  entered  in  the 
column  headed  "B.  F. ";  and  the  net  amount  due  extended  in 
the  column  so  headed. 


THE  BOYLSTON  CLUB 


177 


178      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


THE  BOYLSTON  CLUB 


179 


The  columns  are  footed  for  each  department  and  form  the 
basis  of  an  entry  in  the  voucher  register  charging  payroll, 
account  65,  and  crediting  vouchers  payable  for  the  total  amount 
which  is  to  be  drawn. 

The  total  of  the  benefit  fund  column  is  the  amount  retained 
from  the  employees,  and  is  posted  through  the  cash  received 
book,  form  8,  to  the  credit  of  account  88. 

At  the  close  of  the  month  the  payroll  book  is  cross  added  to 
obtain  the  total  salaries  to  date,  the  total  benefit  fund  credit, 
and  the  net  cash  received  by  the  employees. 

When  the  last  day  of  the  month  does  not  fall  on  Thursday, 
the  bookkeeper  goes  over  the  payroll  book  and  accrues  the 
salaries  for  that  portion  of  the  week  or  month  since  the  last 
payroll  day,  and  enters  the  amount  in  the  column  headed 
"accrued."  The  totals  for  the  month  are  made  up  by  depart- 
ments using  the  column  headed  "total  salaries  for  the  month." 
The  total  salaries  for  the  month  which  is  the  total  salary 
column,  plus  the  accrual,  minus  the  accrual  in  the  previous 
month,  forms  the  basis  of  a  journal  entry  charging  the  various 
departmental  accounts  120  to  127  inclusive,  130,  131,  133  and 
140,  and  crediting  payroll,  account  65. 


DIRECTORY       OF      EMPLOYEES 


MAME  — 
ADDRESS 


DATE  EMPLOYED  . 

DEPARTMEHT 

DUTIES         

REFERENCES 


Form  24 

Form  24  Directory  of  Employees. — This  form  is  made  up 
from  information  furnished  by  the  heads  of  departments  at  the 
time  the  man  is  employed,  and  is  kept  in  the  manager's  office, 
arranged  alphabetically.  It  is  intended  to  furnish  information 
in  connection  with  each  one  of  the  employees.  Whenever  an 
employee  is  discharged  or  leaves,  the  fact  is  reported  to  the 
manager,  and  the  card  is  removed  from  the  file  and  the  date 
and  reason  for  his  leaving  entered  on  the  back. 


180      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


Form  25     Inventory  Card 
Form  26     Insurance  Register 
Form  27     Membership  Ticket 

These  forms  do  not  require  detailed  explanation,  being  simply 
stock  forms  without  special  ruling  or  printing. 


MEMBERSHIP    EXPlRATlOrt  IMDEX 
MAME    — . 


DATE  ELECTED 


FOR 


ANNUAL  DUES 


Form  28 

Form  28  Members  Expiration  Index. — This  form  is  made 
out  whenever  a  member  is  elected.  It  is  filed  according  to  the 
month  in  which  the  membership  expires,  the  cards  in  each  month 
being  arranged  alphabetically. 

At  the  close  of  each  month,  when  the  members'  bills  are  being 
prepared,  the  dues  expiring  in  that  month  are  added  to  the  bill. 

When  the  cash  is  received  an  entry  is  made  in  the  cash  book 
showing  the  name  and  amount.  These  items  are  posted  from 
the  cash  book  to  the  card,  form  28,  and  also  form  29. 

At  the  end  of  the  month  in  which  payments  should  be  made 
the  expiration  index  is  reviewed,  and  unpaid  cards  removed 
therefrom.  The  cards  which  have  been  removed,  showing  that 
the  members  did  not  pay  their  dues  within  the  month  following 
the  expiration  of  membership,  form  the  basis  for  posting  to 
the  members'  ledger,  form  19,  in  the  dues  section.  After  the 
postings  have  been  made  to  the  members'  ledger  the  cards  are 
summarized  and  the  summary  forms  the  basis  of  a  journal 
entry  charging  account  5,  members'  unpaid  dues,  and  crediting 
account  84,  reserve  for  members'  unpaid  dues,  for  the  total 
dues  remaining  unpaid  thirty  days  after  bill  has  been  rendered. 

When  the  dues  are  finally  paid,  that  is  in  the  second  or  third 
month  after  the  bill  has  been  rendered,  an  entry  is  made  in 
the  cash  book,  in  the  column  headed  "private  ledger,"  which 
debits  cash  and  credits  account  5;  this  entry  is  posted  to  the 


THE  BOYLSTON  CLUB  181 

corresponding  account  in  the  members'  ledger,  and  entries  are 
made  on  the  cards,  forms  28  and  29. 

From  the  above  explanation  it  will  be  seen  that  the  mem- 
bers' unpaid  dues  account  in  the  general  ledger  contains  only 
those  dues  unpaid  thirty  days  after  bills  have  been  rendered. 

Form  29     Directory  of  Members. — The  directory  is  made  out 


DIRECTORY  OF  MEHBERS 

NAMF                                                                                               Ho. 

HOME 

ADDRESS 

Tfet. 

OCCUR 
Buisit 

vrinN 

IFIflfr    AnnRF.ftfl 

TEL 

CNTE 
DATE 

DATE 

FOR  YE/ 

?c-n     Ry 

ELCCTU 

RESIGNED  OR    DROPPED 

ANNUAL  DUES 

u?                 PAI  n 

ASSESSMENTS 
DATE      AMOUMT       PAID 

Form  29 

when  a  member  is  elected  and  it  is  kept  on  file  in  the  book- 
keeping department,  arranged  alphabetically. 

When  an  assessment  is  voted  members  are  notified  of  the 
amount  and  when  the  same  is  due.  When  assessments  are  paid 
the  entry  in  the  cash  received  book  operates  to  credit  account  87. 
The  items  appearing  in  the  assessment  column  of  the  cash  re- 
ceipts book  are  posted  to  the  card,  form  29.  At  the  end  of  the 
month  the  directory  is  reviewed,  and  the  cards  showing  unpaid 
assessments  are  removed  from  the  file,  and  postings  are  made 
to  the  members'  ledger  in  the  assessments  section.  When  the 
posting  has  been  completed  the  cards  are  summarized  and  the 
summary  forms  the  basis  of  a  journal  entry  charging  account  6, 
members'  unpaid  assessments,  and  crediting  account  85,  reserve 
for  members'  unpaid  assessments. 

When  these  overdue  assessments  are  finally  paid,  that  is,  in 
the  second  or  third  month  after  notification  has  been  sent,  the 
entry  in  the  cash  book  in  the  column  headed  "private  ledger" 
operates  to  credit  account  6.  Postings  are  also  made  from  the 
cash  book  to  the  credit  of  the  members'  accounts  in  the  members' 


ledger,   and  a  notation  of  the  date  of  payment  is   made   on 
form  29  and  the  card  returned  to  the  file. 

A  book  directory  of  members  is  also  prepared  and  kept  in  the 
manager's  office. 

Form  30     Assessment  Receipt  Book 
Form  31     Chart  of  Organization 
Form  32     Departmental  Income  and  Expenses 
Form  33     Monthly  Income  and  Expense  Statement 
Form  34     Monthly  Balance  Sheet 

The  above  forms  do  not  require  special  explanation,  as  they 
are  similar  to  those  discussed  in  connection  with  previous  systems. 

Form  35     Newspapers  and  Periodicals  Received  and  Re- 
turned.— The  newspapers  and  magazines  sold  at  the  news-stand 


rc.m  nojs                   -.                                                      ,_. 
flEWSPAPERa       AMD       rERIODlCAUS 

HAMF 

RECEIVED 

PRICE: 

RETURNED 

NUMBER 
SOLD 

TOTAL 
SELLING 

PRICE 

DATE 

Hui-IBER 

COST 

SEU-IM6 

DATE 

NUMBER 

^J 

~~  ' 

L^  J 

'     '•*•  

' 

.. 

^*^ 

Form  35 


are  not  considered  purchased  until  sold,  and  therefore  a  special 
method  of  accounting  is  necessary  in  order  to  keep  a  careful 
record  of  the  department. 

The  cash  sales  are  rung  up  in  the  cash  register  and  reported 
to  the  bookkeeper  each  day  by  the  cashier.  Charge  sales  are 
handled  by  charge  tickets  made  out  in  single  copies,  which  are 
sent  to  the  manager's  office  for  inspection,  then  to  the  book- 
keeping department,  where  they  are  totaled  and  compared  with 
the  check  sheet  made  out  by  the  head  clerk  in  charge  of  the 
news-stand.  This  summary  as  previously  outlined,  operates  to 
charge  account  4  and  credit  account  107. 

When  papers  and  magazines  'are  delivered,  form  35  is  used 
to  show  the  date  and  quantity  received  and  the  cost  and  selling 
price.  If  the  paper  or  periodical  is  returnable,  when  the 
unsold  copies  are  returned  an  entry  is  made  in  the  returned 
section  of  the  sheet  and  number  sold  extended  in  the  proper 
column,  which,  multiplied  by  the  selling  price,  shows  the  total 
amount  to  be  accounted  for  by  the  news-stand. 


THE  BOYLSTON  CLUB  183 

Whenever  papers  are  delivered  the  messenger  or  driver  takes 
a  receipt,  a  copy  of  which  is  sent  to  the  bookkeeper,  where  form 
35  is  made  up.  When  the  papers  are  returned  the  receipt  is 
taken  from  the  driver,  and  original  sent  to  the  bookkeeping 
department,  where  an  entry  is  made  on  form  35  in  the  returned 
section. 

When  the  invoice  is  received  from  the  news  agency,  it  is  com- 
pared with  form  35  and  if  correct  is  approved  and  passed 
through  the  voucher  register  in  the  usual  way. 

Where  papers,  etc.,  cannot  be  returned,  a  charge  is  made  for 
the  cost  through  the  voucher  register  direct  to  the  news-stand 
and  the  unsold  copies  instead  of  being  returned  are  distributed 
to  various  charitable  institutions. 

When  the  profit  and  loss  account  is  made  up,  an  inventory 
is  taken  at  the  news-stand  showing  all  papers  on  hand.  The 
number  of  papers  sold  is  determined  by  comparing  the  in- 
ventory with  form  35,  and  those  which  have  not  been  charged 
against  the  news-stand  form  the  basis  of  a  journal  entry,  charg- 
ing account  127  and  crediting  account  60.  This  entry  is  reversed 
at  the  beginning  of  the  next  period. 

LIST  OF  GENERAL  LEDGER  ACCOUNTS 

CURRENT  ASSETS 
Acct.  No. 

1  Cash  in  Bank 

2  Petty  Cash  Fund 

3  Change  Fund 

4  Members'  House  Accounts 

5  Members'  Unpaid  Dues 

6  Members'  Unpaid  Assessments 

OUTSIDE  INVESTMENTS 

15  Fund  for  Redemption  of  Debentures 

16  Building  Fund 

17  Employees'  Benefit  Fund 

INVENTORIES 

20  General  Stores 

21  Restaurant  Stores 

22  Wine  Room 

23  Cigar   Room 

FIXED  ASSETS 

30  Land 

31  Building 

32  General  House  Furnishings 

33  Rooms  Furnishings 

34  Paintings,  Books  and  Bric-a-brac 

35  Accounting  Department  Furniture  &  Fixturea 


184      SYSTEM  BUILDINO  AND  CONSTRUCTIVE  ACCOUNTING 

Acct.  No. 

36  Restaurant  Furniture  &  Fixtures 

37  Restaurant  China  &  Glassware 

38  Restaurant  Linen 

39  Restaurant  Silver  and  Cutlery 

40  Bar  Furniture 

41  Bar  Glassware 

42  Cigar  Counter  and  Fixtures 

43  Billiard  and  Pool  Room  Equipment 

44  Barber  Shop  Equipment 

45  Bowling  Alleys  Equipment 

46  Newspapers  and  Periodicals  Counter  and  Equipment 

47  Machinery 

PREPAID  ASSETS 

50  Unexpired  Insurance 

51  Prepaid  Taxes 

52  Unexpired  Licenses 

CURRENT  LIABILITIES 

60         Accounts  Payable 

ACCRUED  LIABILITIES 

65  Payroll   (Accrued  Salaries) 

66  Accrued  Taxes 

67  Accrued  Interest  on  Mortgage  Payable 

68  Accrued  Interest  on  Debentures 

FIXED  LIABILITIES 

75  Mortgage  Payable 

76  Outstanding  Debentures 

RESERVE  ACCOUNTS 

80  Members'  Dues  Unapportioned 

81  Reserve  for  Depreciation  of  Building 

82  Reserve  for  Depreciation  of  Furniture  and  Equipment 

83  Reserve  for  Members'  Doubtful  Accounts 

84  Reserve  for  Members'  Unpaid  Dues 

85  Reserve  for  Members'  Unpaid  Assessments 

86  Reserve  for  Redemption  of  Debentures 

87  Assessment  Fund 

88  Employees'  Benefit  Fund 

CAPITAL  ACCOUNTS 

90  Initiation  Fees 

91  Surplus 

92  Profit  and  Loss 

REVENUE  ACCOUNTS 

100  Restaurant  Revenue 

101  Bar  Revenue 

102  Cigars  Revenue 

103  Billiards  and  Pool  Revenue 

104  Rooms  Revenue 

105  Barber  Shop  and  Boot  Blacking  Revenue 

106  Bowling  Revenue 

107  Newspapers  and  Periodicals  Revenue 

108  Dues  Apportioned 

DEPARTMENTAL  EXPENSES 

120  Restaurant  Salaries  and  Expenses 

121  Bar  Salaries  and  Expenses 


THE  BOYL8TON  CLUB  185 

Acct.  No. 

122  Cigars  Salaries  and  Expenses 

123  Billiards  and  Pool  Salaries  and  Expenses 

124  Rooms  Salaries  and  Expenses 

125  Barber  Shop  and  Boot  Blacking  Salaries  and  Expenses 

126  Bowling  Salaries  and  Expenses 

127  Newspapers  and  Periodicals  Salaries  and  Expenses 

130  Management  Salaries  and  Expenses 

131  Accounting  Department  Expenses 

132  Laundry 

133  Heat,  Light  and  Power 

134  Maintenance  of  Building 

GENERAL  EXPENSES 

140  General  House  Expenses 

141  Expenses  of  Committees 

142  Interest  on  Mortgage  Payable 

143  Interest  on  Outstanding  Debentures 

144  Cash  Variations 

150  Cash  Sales 

160  Cash  Discount  on  Purchases 

161  Interest  on  Bank  Balances 

SUBSIDIARY  DEPARTMENTAL  EXPENSES 

RESTAURANT 

120 — 1  Food  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Ice 

5  Laundry 

6  Fuel 

7  Stationery  and  Printing 

8  Depreciation  of  China  and  Glassware 

9  Depreciation  of  Linen 

10  Depreciation  of  Silver 

11  Soap  and  Washing  Compound 

12  Uniforms  and  Repairs 

13  Sundry  Repairs 

14  Depreciation  of  Furniture  and  Fixtures 

15  Portion  of  Management  Salaries  and  Expenses 

16  Portion  of  Accounting  Department  Expenses 

17  Portion  of  Heat,  Light  and  Power 

18  Portion  of  Maintenance  of  Building 

19  Miscellaneous  Expenses 

BAR 

121 — 1  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Ice 

5  License 

6  Stationery  and  Printing 

7  Depreciation  of  Glassware 

8  Laundry 

9  Sundry  Repairs 

10  Uniforms   and    Repairs 

11  Depreciation  of  Furniture  and  Fixtures 

12  Portion  of  Management  Salaries  and  Expenses 

13  Portion  of  Accounting  Department  Expenses 


186      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Acct.  No. 

14  Portion  of  Heat  and  Light 

15  Portion  of  Maintenance  of  Building 

16  Miscellaneous  Expenses 

CIGABS 

122 — 1  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Stationery  and  Printing 

5  Depreciation  of  Fixtures 

6  Portion  of  Management  Salaries  and  Expenses 

7  Portion  of  Accounting  Department  Expenses 

8  Portion  of  Heat  and  Light 

9  Portion  of  Maintenance  of  Building 
10  Miscellaneous  Expenses 

BILLIARDS  AND  POOL 

123—1  Salaries 

2  Board  of  Employees 

3  Stationery  and  Printing 

4  Uniforms  and  Repairs 

5  Repairs  to  Equipment 

6  .   Depreciation  of  Equipment 

7  Portion  of  Management  Salaries  and  Expenses 

8  Portion  of  Accounting  Department  Expenses 

9  Portion  of  Heat  and  Light 

10  Portion  of  Maintenance  of  Building 

11  Miscellaneous  Expenses 

ROOMS 

124 — 1  Housekeeping  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Laundry 

5  Depreciation  of  Linen 

6  Stationery  and  Printing 

7  Uniforms  and  Repairs 

8  Depreciation  of  Furnishings 

9  Portion  of  Management  Salaries  and  Expenses 

10  Portion  of  Accounting  Department  Expenses 

11  Portion  of  Heat,  Light  and  Power 

12  Portion  of  Maintenance  of  Building 

13  Miscellaneous  Expenses 

BAKBER  SHOP  AND  BOOT  BLACKING 

125—1  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Laundry 

5  Stationery  and  Printing 

6  Depreciation  of  Linen 

7  Uniforms  and  Repairs 

8  Depreciation  of  Equipment 

9  Portion  of  Management  Salaries  and  Expenses 
10  Portion  of  Accounting  Department  Expenses 

1 '  Portion  of  Heat  and  Light 

12  Portion  of  Maintenance  of  Building 

13  Miscellaneous  Expenses 


THE  BOYL8TON  CLUB  187 

BOWLING 

Acct.  No. 

126 — 1  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Stationery  and  Printing 

5  Repairs  to  Equipment 

6  Depreciation  of  Equipment 

7  Portion  of  Management  Salaries  and  Expenses, 

8  Portion  of  Accounting  Department  Expenses 

9  Portion  of  Heat  and  Light 

10  Portion  of  Maintenance  of  Building 

11  Miscellaneous  Expenses 

NEWSPAPERS  AND  PERIODICALS 

127 — 1  Supplies  Used 

2  Salaries 

3  Board  of  Employees 

4  Stationery  and  Printing 

5  Depreciation  of  Equipment 

6  Portion  of  Management  Salaries  and  Expenses 

7  Portion  of  Accounting  Department  Expenses 

8  Portion  of  Heat  and  Light 

9  Portion  of  Maintenance  of  Building 
10  Miscellaneous  Expenses 

GENERAL  HOUSE  EXPENSES 

140 — 1  Supplies  Used 

2  Portion  of  Management  Salaries  and  Expenses 

3  Board  of  Employees 

4  Laundry 

5  Stationery  and  Printing 

6  Postage 

7  General  House  Repairs 

8  Portion  of  Maintenance  of  Building 

9  Depreciation  of  General  House  Furnishings 

10  Books  and  Bric-a-brac  Used 

11  Newspapers  and  Periodicals 

12  Uniforms  and  Repairs 

13  Telephone  and  Telegrams 

14  Portion  of  Accounting  Department  Expenses 

15  Portion  of  Heat,  Light  and  Power 

16  Miscellaneous  Expenses 

COMMITTEE  EXPENSES 

141 — 1  Board  of  Governors 

2  Membership 

3  Entertainment 

4  Art  and  Library 

5  Publicity 

6  Civic  Secretary 

7  Other  Organizations 

FORMS 

PURCHASE  RECORDS  Form  No. 

Purchase  Order  1 

Stores  Requisition  2 

Goods  Received  Slip  3 

Voucher  Jacket  4 

Voucher  Register  5 

Voucher  Index  Card  6 

Analysis  of  Departmental  Expenses                                             7 


188      8YHTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

CASH  RECEIPTS 

Cash  Received  8 

CASH  DISBURSEMENTS 

Currency  Voucher  9 

Voucher  Check  10 

Check  Register  11 

SALES  RECORDS 

Charge  Tickets 

Restaurant  12-a 

Grill  Room  12-b 

Employees'  Table  12-c 

Bar  12-d 

Cigars  12-e 

Billiards  and  Pool  12-f 

Rooms  12-g 

Barber  Shop  12-h 

Bowling  12-i 

Newspapers  and  Periodicals  12-j 
Check  Sheets 

Restaurant  13 -a 

Bar  13-b 

Cigars  13-c 

Billiards  and  Pool  13-d 

Rooms  13-e 

Bowling  13-f 

Room  Register  14 

Room  Rack  Index  Card  15 

Housekeepers'  Daily  Report  16 

Record  of  Daily  Business  17 

Members'  Daily  Charges  18 

Members'  Ledger  19 

Trial  Balance  Book  for  Members'  Ledger  20 

Members'  Monthly  Bill  21 

GENERAL  RECORDS 

General  Ledger 

Trial  Balance  Book  for  General  Ledger 

Journal  22 

Pay  Roll  Book  23 

Directory  of  Employees  24 

Inventory  Card  25 

Insurance  Register  26 

Membership  Ticket  27 

Membership  Expiration  Index  28 

Directory  of  Members  29 

Assessment  Receipt  Book  30 
Appropriations  Book 

Chart  of  Organization  31 

Departmental  Income  and  Expenses                                            32 

Monthly  Income  and  Expense  Statement  33 

Monthly  Balance   Sheet  34 

Newspapers  and  Periodicals  Received  and  Returned              35 


CHAPTER  XIX 

ASSETS  AND  LIABILITIES 

Account  i  Cash  in  Bank. — This  is  the  ordinary  cash  in  banks 
account.  All  cash  is  deposited  the  same  day  as  received,  and  all 
payments  are  by  check  except  petty  cash  disbursements,  which 
are  made  from  an  imprest  fund  of  $300.00,  this  being  the  esti- 
mated amount  of  such  payments  for  a  month. 

The  account  is  charged  with  cash  received  and  credited  with 
check  payments.  The  balance  represents  the  amount  of  cash 
in  bank  and  at  the  close  of  the  month  should  be  reconciled  with 
the  balance  shown  by  the  bank,  and  should  also  be  in  agreement 
with  the  bank  balance  column  in  the  check  register,  form  11. 

Account  2  Petty  Cash  Fund. — This  is  an  imprest  fund,  op- 
erated in  the  usual  manner,  replenished  whenever  necessary,  or 
in  any  event  at  the  close  of  each  month. 

Account  3  Change  Fund. — This  account  represents  the 
change  funds  on  hand  in  the  various  departments. 

There  is  a  cash  register  provided  in  each  department  with  a 
change  fund,  the  total  of  all  departments  amounting  to  $150.00, 
and  with  the  petty  cash  fund,  account  2,  is  shown  in  the  balance 
sheet  as  a  part  of  the  general  cash  although  represented  by  a 
separate  account  in  the  general  ledger. 

Members'  Accounts. — The  charges  to  members  are  made  in 
three  ways,  or  in  other  words,  ascertained  from  three  different 
sources ;  first,  for  services  rendered,  that  is,  rooms,  meals  or  other 
privileges  granted  in  the  different  departments;  second,  annual 
dues ;  and  third,  assessments  levied  for  raising  funds  to  be  used 
for  specific  purposes. 

In  theory  the  services  are  charged  to  account  4,  dues  to  account 
5  and  assessments  to  account  6.  As  a  matter  of  fact,  however, 
these  accounts  receive  charges  only  for  accounts  the  payment  of 
which  is  delayed,  except  in  the  case  of  account  4,  for  services, 
which  is  charged  with  the  total  amount  due  from  the  members. 

Account  4  Members'  House  Accounts. — Debit  at  the  end  of 
the  month  with  the  total  services  or  sales  to  the  members  during 
the  month  as  shown  by  the  summary  of  sales  or  record  of  daily 
business. 

189 


190      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Credit  at  the  end  of  each  month  for  the  total  cash  received 
during  the  month  in  settlement  of  house  charges  as  shown  by 
the  corresponding  column  in  the  cash  book. 

The  balance  represents  the  amount  due  from  members  on  their 
house  accounts. 

The  bills  which  are  rendered  to  the  members  should  be  paid 
during  the  succeeding  month  and  if  not  paid  the  members'  names 
are  posted  and  their  credit  suspended.  If,  after  sixty  days,  a 
member's  account  is  still  unpaid  and  efforts  to  collect  have  been 
unsuccessful,  he  is  dropped  from  the  membership  and  the  amount 
due  from  him  charged  off. 

The  balance  of  this  account  controls  that  section  of  the  mem- 
bers' ledger  covering  house  charges  accounts. 

Account  5  Members'  Unpaid  Dues. — In  the  accounting  de- 
partment there  is  kept  a  file  of  the  members,  form  28,  arranged 
in  the  order  in  which  their  membership  expires.  On  the  first 
of  each  month  the  cards  expiring  during  the  month  are  reviewed 
and  to  the  monthly  bill  of  the  members  whose  memberships  ex- 
pire in  that  month  is  added  the  item  of  dues. 

When  the  bill  is  paid,  credit  through  the  cash  book  is  made 
to  income  account  80.  At  the  end  of  the  month  those  not  paid 
are  summarized  and  the  summary  forms  the  basis  of  a  journal 
entry  charging  members'  unpaid  dues,  account  5,  and  crediting 
reserve  for  members'  unpaid  dues,  account  84. 

During  the  second  month  if  the  member  pays  his  bill  a  credit 
is  made  through  the  cash  book  private  ledger  column  to  account 
5,  and  at  the  end  of  the  month  a  journal  entry  is  made  for  all 
of  the  accounts  of  this  class  paid  during  the  month  which  oper- 
ates to  debit  account  84,  reserve  for  members'  unpaid  dues,  and 
credit  80,  members'  dues  unapportioned,  which  is  an  income 
account. 

If  at  the  end  of  three  months  the  members'  dues  are  still  un- 
paid a  journal  entry  is  made  charging  reserve  for  members' 
unpaid  dues,  account  84,  and  crediting  members'  unpaid  duas, 
account  5.  This  journal  entry  operates  to  charge  to  the  reserve 
such  dues  as  are  unpaid  at  the  close  of  the  third  month  at  which 
time  a  member  forfeits  his  membership. 

The  balance  of  account  5  represents  the  amount  of  dues  un- 
paid more  than  thirty  days  old. 

Account  6     Members'  Unpaid  Assessments. — This  account 


ASSETS  AND  LIABILITIES  191 

is  handled  in  the  same  way  as  account  5  except  that  it  covers 
assessments  instead  of  dues. 

There  must  be  a  two-thirds  vote  in  order  to  authorize  an 
assessment.  No  entry  is  made  when  an  assessment  has  been  au- 
thorized except  to  note  the  same  on  the  directory  of  members, 
form  29,  and  notices  are  mailed  to  members. 

When  an  assessment  is  paid  the  cash  received  on  account  of 
the  assessment  is  credited  to  account  87,  assessment  fund. 

At  the  close  of  the  month  following  the  assessment,  those 
assessments  which  are  still  unpaid  are  summarized  and  form  the 
basis  of  a  journal  entry  charging  account  6,  members'  unpaid 
assessments,  and  crediting  account  85,  reserve  for  members' 
unpaid  assessments. 

When  these  assessments  are  finally  paid  the  credit  through  the 
cash  book  private  ledger  column  is  to  account  6,  and  at  the  close 
of  the  month  all  such  assessments  paid  during  the  month  are 
summarized  and  form  the  basis  of  a  journal  entry  charging 
account  85,  reserve  for  members'  unpaid  assessments,  and  credit- 
ing account  87,  assessment  fund. 

In  the  case  of  both  account  5  and  account  6  the  detailed  post- 
ings are  made  from  the  cash  book  to  the  members'  ledger  and  to 
the  members'  directory. 

Account  15  Fund  for  Redemption  of  Debentures. — In  re- 
cent years  the  club  has  erected  a  new  building,  and  to  finance 
the  construction  issued  debenture  notes,  which,  when  issued, 
operated  to  credit  the  liability  account,  76,  outstanding  deben- 
tures. The  terms  under  which  these  notes  were  issued  require 
the  setting  aside  of  a  certain  sum  each  year  to  redeem  the  notes. 
The  mechanical  operation  of  setting  aside  this  cash  is  to  credit 
cash  through  the  check  register  for  the  check  drawn  to  the  order 
of  the  trustees,  and  charge  account  15. 

The  funds  are  invested  under  the  direction  of  the  executive 
committee  and  the  income  from  the  investments  is  charged  to 
account  15,  the  credit  being  to  account  86. 

Account  15  is  credited  for  amounts  withdrawn  to  pay  off  the 
notes;  that  is,  when  the  notes  are  paid  an  entry  is  made  charging 
account  76,  outstanding  debentures,  and  crediting  account  15, 
fund  for  redemption  of  debentures. 

Account  1 6  Building  Fund. — This  account  represents  a  fund 
accumulated  for  the  construction  of  the  building.  The  funds 


192      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

were  raised  from  various  sources,  such  as  subscriptions,  con- 
tributions, etc.,  and  when  the  cash  was  received  it  was  turned 
over  to  the  building  trustees  and  an  entry  made  crediting  cash 
and  charging  account  16.  The  account  is  credited  for  amounts 
withdrawn  to  pay  for  construction,  the  charge  being  to  account 
31. 

In  this  connection  it  might  be  stated  that  the  cash  did  not  pass 
through  the  club  books  after  being  placed  in  the  fund  but  the 
reports  of  payments  by  the  building  trustees  were  used  as  the 
basis  of  a  journal  entry  charging  building  account  31  and  credit- 
ing the  fund. 

Account  17  Employees'  Benefit  Fund. — A  brief  description 
of  this  account  has  been  given  in  connection  with  the  payroll 
form. 

When  a  man  enters  the  employ  of  the  club  he  may  join  the 
benefit  association  if  he  so  desires.  If  he  joins,  a  certain  portion 
of  his  salary  is  withheld,  varying  with  the  amount  of  salary  he 
receives.  Also,  at  the  holiday  season  the  members  of  the  club 
are  asked  to  contribute  to  build  up  the  fund. 

When  amounts  are  received  from  the  members  for  the  fund 
the  cash  so  received  is  turned  over  to  the  trustees  of  the  fund 
and  a  journal  entry  made  charging  account  17,  employees'  bene- 
fit fund,  and  crediting  account  88,  employees'  benefit  fund. 

The  amount  reserved  from  the  pay  of  the  employees  is  handled 
as  follows: 

When  the  payroll  is  made  up  an  entry  charging  payroll  and 
crediting  cash  for  the  total  amount  of  the  payroll  is  put  through. 
The  amount  to  be  placed  in  the  fund  is  withdrawn  and  turned 
over  to  the  trustees,  the  same  journal  entry  being  made  as  to 
transfer  contributions  to  the  trustees. 

The  funds  are  invested  by  the  trustees  and  periodical  reports 
rendered.  The  income  from  the  investment  of  this  fund  is 
charged  to  account  17,  the  offsetting  credit  being  to  account  88. 
When  an  employee  is  sick  he  receives  benefits  and  the  amounts 
paid  out  are  reported  by  the  trustees,  at  which  time  a  journal 
entry  is  made  charging  the  reserve,  account  88,  and  crediting 
the  fund,  account  17. 

When  an  employee  leaves  the  service  he  may  withdraw  40% 
of  the  amount  which  he  has  paid  in,  the  entry  being  a  debit  to 
account  88  and  a  credit  to  account  17. 


ASSETS  AND  LIABILITIES  193 

The  debit  balance  of  account  17  represents  the  amount  of  fund 
in  the  hands  of  trustees  for  the  employees'  benefit  and  should 
equal  the  credit  balance  of  account  88  which  is  the  offsetting 
reserve. 

Account  20  General  Stores. — Debit  with  all  purchases  of 
general  supplies  used  in  the  various  departments  as  shown  by 
the  corresponding  column  in  the  voucher  register.  This  includes 
such  items  as  china,  glass,  silver,  kitchen  utensils  and  linen  used 
in  the  restaurant,  supplies  for  the  barber  shop,  housekeeping 
department,  stationery,  and  other  supplies  used  by  the  manage- 
ment and  accounting  department. 

Supplies  are  withdrawn  by  requisition  for  the  different  de- 
partments and  at  the  close  of  the  month  the  requisitions  are 
analyzed  by  departments  and  a  monthly  journal  entry  is  made, 
see  journal  entry  21,  debiting  the  various  departments  and  credit- 
ing account  20.  The  departmental  accounts  charged  through  this 
journal  entry  are  expense  accounts  120  to  127  inclusive,  130,  131, 
140  and  possibly  141. 

The  balance  of  account  20  represents  the  cost  of  general  sup- 
plies on  hand  and  is  reconciled  with  the  going  inventory,  which 
is  kept  in  the  stores  department  at  the  end  of  each  period. 

Account  21  Restaurant  Stores. — This  account  is  operated 
in  the  same  general  way  as  account  20,  except  that  it  applies  to 
restaurant  stores  consisting  mainly  of  food  supplies.  The  ac- 
count is  debited  for  all  such  supplies  purchased  as  shown  by  the 
corresponding  column  in  the  voucher  register. 

Perishable  supplies  do  not  pass  through  the  stores  department, 
but  are  delivered  at  the  kitchen.  They  are,  however,  charged  to 
this  account.  Canned  goods,  etc.,  are  kept  in  the  stores  depart- 
ment and  are  issued  on  requisition. 

To  arrive  at  the  cost  of  supplies  used  a  physical  inventory  is 
made  of  the  supplies  on  hand  in  the  kitchen  and  an  entry  is  then 
made  charging  account  120  and  crediting  account  21  for  the 
difference  between  the  amount  on  hand  at  the  beginning  of  the 
month,  plus  the  purchases,  and  the  amount  on  hand  at  the  close 
of  the  month  as  shown  by  the  physical  inventory. 

Account  22  Wine  Room. — This  account  is  operated  in  the 
same  general  way  as  accounts  20  and  21.  Purchases  for  the 
wine  room  are  charged  to  this  account  through  the  special  column 
in  the  voucher  register  and  are  withdrawn  from  stores  on  re- 


194      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

quisition.  At  the  end  of  the  period  a  physical  inventory  is 
taken  of  the  supplies  on  hand  and  an  entry  charging  the  cost 
of  supplies  used  to  account  121  and  crediting  account  22  is 
made.  If  the  percentage  of  cost  of  sales  to  sales  shows  any 
appreciable  variation  from  month  to  month,  indicating  that  mer- 
chandise is  not  being  accounted  for,  tests  of  quantities  sold  are 
made  to  locate  the  shortage. 

The  balance  of  this  account  represents  the  cost  of  wine  room 
supplies  on  hand. 

Account  23  Cigar  Room. — This  account  is  operated  in  the 
same  way  as  accounts  21  and  22 ;  that  is,  the  cost  of  sales  is 
determined  by  the  physical  inventory  and  such  cost  is  charged 
through  a  journal  entry  to  operating  account  122. 

Account  30  Land. — This  account  represents  the  cost  of  land 
owned  by  the  club  and  was  charged  with  the  original  purchase 
price. 

Account  31  Building. — This  account  represents  the  cost  of 
the  building.  The  depreciation  on  the  building  is  written  off  at 
the  rate  of  2%  per  year,  the  entry  being  a  debit  to  operating 
account  134,  maintenance  of  building,  and  a  credit  to  reserve  for 
depreciation  of  buildings,  account  81. 

Account  32  General  House  Furnishings. — This  account  rep- 
resents the  cost  of  the  furniture  in  the  general  rooms  open  to 
members,  but  does  not  include  the  furniture  in  the  office,  dormi- 
tories, or  restaurant.  The  depreciation  on  this  class  of  equip- 
ment is  written  off  at  the  rate  of  10%  per  year,  the  charge  being 
to  general  house  expense,  account  140,  and  the  credit  to  reserve 
for  depreciation  of  furniture  and  equipment,  account  82. 

Account  33  Rooms  Furnishings. — This  account  covers  the 
furniture  in  the  dormitories  but  does  not  include  linen  and  sup- 
plies. The  depreciation  is  written  off  at  the  rate  of  15%  per 
year,  the  charge  being  to  account  124,  rooms  salaries  and  ex- 
penses, and  the  credit  to  account  82,  reserve  for  depreciation 
of  furniture  and  equipment. 

Account  34  Paintings,  Books  and  Bric-a-Brac. — This  ac- 
count is  charged  with  the  cost  of  paintings  acquired  and  for  the 
cost  of  books  and  bric-a-brac  originally  installed  in  the  club.  No 
further  charges  are  made  to  this  account  for  books  purchased 
unless  bought  with  the  intention  of  increasing  the  permanent 
supply.  New  books  purchased  which  do  not  increase  the  per- 


ASSETS  AND  LIABILITIES  195 

manent  supply  are  charged  through  the  voucher  register  to  gen- 
eral house  expenses,  account  140.  No  depreciation  is  taken  on 
this  account. 

Account  35  Accounting  Djepartment  Furniture  and  Fix- 
tures is  an  ordinary  furniture  and  fixtures  account,  charged 
with  the  cost  of  furniture  acquired  and  credited  with  the  cost, 
less  depreciation,  of  furniture  disposed  of. 

Depreciation  is  written  off  at  the  rate  of  10%  per  year,  being 
charged  to  operating  account  131,  accounting  department  ex- 
penses, and  credited  to  the  reserve,  account  82. 

Account  36  Restaurant  Furniture  and  Fixtures. — This  ac- 
count represents  the  cost  of  the  furniture  and  fixtures  in  the 
restaurant  and  kitchen.  Depreciation  is  written  off  at  the  rate 
of  10%  per  year,  being  charged  to  account  120,  restaurant  sal- 
aries and  expenses,  and  credited  to  reserve  for  depreciation  of 
furniture  and  equipment,  account  82. 

Account  37  Restaurant  China  and  Glassware. — This  account 
is  charged  with  the  cost  of  china,  etc.,  originally  purchased  for 
the  restaurant.  No  further  charges  are  made  to  this  account,  all 
future  purchases  being  charged  to  the  expense  account,  120. 

For  the  first  two  years  the  cost  of  the  original  equipment  pur- 
chased is  written  down  by  journal  entry  to  one-half  its  first  cost 
so  that  after  the  second  year  the  balance  of  this  account  repre- 
sents one-half  the  cost  of  the  china  and  glassware  originally  pur- 
chased for  the  restaurant. 

Account  38  Restaurant  Linen. — This  account  is  operated  in 
the  same  way  as  account  37  and  after  two  years  the  balance 
represents  one-half  the  cost  of  the  linen  originally  purchased. 

Account  39  Restaurant  Silver  and  Cutlery. — This  account 
is  operated  in  the  same  way  as  accounts  37  and  38.  After  the 
second  year  the  balance  represents  one-half  the  cost  of  the  silver 
and  cutlery  originally  purchased  for  the  restaurant. 

Account  40  Bar  Furniture. — This  is  an  ordinary  furniture 
and  fixtures  account  containing  the  cost  of  the  bar  furniture. 
Depreciation  is  written  off  at  the  rate  of  10%  per  year,  the 
charge  being  to  account  121,  bar  salaries  and  expenses,  and  the 
credit  to  reserve  for  depreciation  of  furniture  and  equipment, 
account  82. 

Account  41  Bar  Glassware. — This  account  is  operated  in  the 
same  way  as  accounts  37,  38  and  39,  and  after  the  second  year 


196      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

represents  one-half  the  cost  of  the  glassware  originally  purchased 
for  the  bar. 

Account  42  Cigar  Counter  and  Fixtures. — This  is  an  ordi- 
nary fixture  account,  charged  with  the  cost  of  the  cigar  counter 
and  fixtures.  Depreciation  is  written  off  at  the  rate  of  15% 
per  year,  the  charge  being  to  account  122,  cigars  salaries  and 
expenses,  and  the  credit  to  reserve  for  depreciation  of  furniture 
and  equipment,  account  82. 

Account  43     Billiard  and  Pool  Room  Equipment 
Account  44     Barber  Shop  Equipment. 
Account  45     Bowling  Alleys  Equipment 
Account  46     Newspapers     and     Periodicals      Counter     and 

Equipment 
Account  47     Machinery 

Are  the  same  as  account  42,  each  representing  the  furniture 
and  equipment  of  the  department.  Depreciation  is  charged  off 
at  the  rate  of  10%  for  accounts  43,  44,  46  and  47,  and  5%  for 
account  45.  The  depreciation  so  charged  off  is  debited  to  oper- 
ating accounts  123,  125,  126,  127  and  133. 

Account  50  Unexpired  Insurance. — This  account  is  charged 
through  the  voucher  register  with  the  amount  of  premiums  paid 
on  the  insurance  policies  taken  out.  It  is  credited  by  means  of 
a  journal  entry  with  the  cost  of  insurance  expired  during  the 
period,  the  offsetting  debit  being  to  account  134. 

The  balance  represents  the  amount  of  prepaid  insurance. 

Account  51  Prepaid  Taxes. — This  account  is  brought  on  to 
the  books  at  the  time  the  taxes  are  paid  in  October,  at  which 
time  the  entry  for  the  payment  in  the  check  register  operates  to 
charge  accrued  taxes,  account  66,  for  the  amount  accrued  to  date 
and  account  51,  prepaid  taxes,  for  the  balance.  During  the  last 
half  of  the  year  the  monthly  adjusting  entries  charging  account 
134  and  crediting  account  51,  entirely  eliminate  the  balance,  so 
that  at  April  1  no  balance  remains  in  the  account. 

Any  balance  in  this  account  during  the  year  represents  the 
amount  of  taxes  prepaid. 

Account  52  Unexpired  Licenses. — This  account  is  operated 
in  the  same  way  as  account  51,  the  original  cost  of  the  licenses 
being  charged  to  account  52  and  adjusted  at  the  close  of  each 
period. 

Account   60     Accounts   Payable. — This  is  an  ordinary  ac- 


ASSETS  AND  LIABILITIES  197 

counts  payable  account,  credited  with  the  total  of  the  corre- 
sponding column  in  the  voucher  register  and  charged  with  the 
total  of  the  corresponding  column  in  the  cash  paid  book.  Under 
this  system  a  regular  accounts  payable  purchase  ledger  is  not 
operated,  the  detail  of  the  accounts  payable  being  taken  from  the 
open  items  in  the  voucher  register. 

Account  65  Payroll  (Accrued  Salaries). — Debit  this  ac- 
count through  the  voucher  register  with  the  total  amount  of  the 
payroll.  Credit  through  journal  entry  with  the  distribution  of 
payroll  to  the  expense  accounts  in  the  various  departments  as 
shown  by  the  entry  prepared  from  the  payroll  book,  form  23. 

The  balance  of  this  account  after  the  distribution  has  been 
made  represents  the  amount  of  accrued  wages  and  salaries  and 
is  carried  on  the  balance  sheet  as  a  current  liability. 

Account  66  Accrued  Taxes. — This  is  the  ordinary  accrued 
taxes  account.  It  is  brought  on  to  the  books  at  the  end  of 
each  period  through  adjusting  entries,  charging  taxes  accrued 
during  the  period  to  account  134.  When  the  taxes  are  paid  a 
part  of  the  payment  is  applied  to  account  66,  thus  eliminating 
the  amount  accrued,  the  balance  of  the  amount  being  charged 
to  account  51. 

The  balance  of  this  account  represents  the  accrued  liability 
on  account  of  taxes. 

Account  67  Accrued  Interest  on  Mortgage  Payable. — This 
account  is  brought  on  to  the  books  through  adjusting  entries  in 
the  journal  which  operate  to  charge  account  142  and  credit 
account  67  for  the  interest  expired  during  the  period.  When- 
ever payment  of  interest  is  made  to  the  mortgage  holder,  the 
payment  is  charged  to  this  account. 

The  balance  of  the  account  represents  the  amount  of  unpaid 
interest  accrued  on  the  mortgage  to  date. 

Account  68  Accrued  Interest  on  Debentures. — This  account 
is  operated  in  the  same  way  as  account  67,  the  offsetting  charge 
being  to  account  143,  and  the  balance  representing  unpaid 
interest  accrued  on  debentures  to  date. 

Account  75  Mortgage  Payable. — This  account  was  credited 
at  the  time  the  mortgage  was  assumed  with  the  amount  of  the 
mortgage.  It  is  charged  with  payments  made  to  reduce  the 
mortgage  and  the  balance  represents  the  liability  of  the  club  on 
the  mortgage. 


198      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Account  76  Outstanding  Debentures. — This  is  a  liability 
account  representing  the  debenture  notes  which  have  been  issued 
to  pay  for  the  construction  of  the  building  less  payments 
thereon,  and  is  shown  on  the  balance  sheet  as  a  fixed  liability. 

Account  80  Members'  Dues  Unapportioned. — In  consider- 
ing this  account  the  main  point  which  should  be  emphasized  is 
the  method  of  distributing  income  from  dues  over  the  various 
months  of  the  year  so  that  each  period  will  receive  its  proper 
share.  Manifestly,  if  a  large  number  of  memberships  expired 
in  one  month  and  few  in  another  and  the  income  from  dues 
was  taken  directly  to  income  the  statement  of  operations  would 
show  a  large  income  in  one  month  and  a  very  small  income 
in  another.  The  result  of  this  condition,  provided  expenses  re- 
mained normal,  would  be  that  the  operations  would  show  a 
marked  deficit  in  the  months  in  which  little  income  was  re- 
ceived. To  avoid  this  condition  the  dues  when  collected  are 
credited  to  account  80  and  then  apportioned  as  equitably  as 
possible  over  the  different  months  of  the  year. 

This  account  is  credited  from  the  cash  received  book  with  the 
total  amount  of  cash  received  on  account  of  annual  dues  falling 
due  and  paid  in  the  current  month.  It  is  credited  for  amounts 
transferred  from  account  84,  through  journal  entry  represent- 
ing cash  received  on  account  of  annual  dues  falling  due  in  the 
previous  months,  and  not  paid  until  the  current  month. 

At  the  close  of  each  month  this  account  is  charged  with  1/12 
of  the  estimated  annual  revenue  from  membership  dues,  the 
object,  as  stated  above,  being  to  transfer  income  from  dues 
equitably  over  the  year.  When  account  80  is  charged  the  off- 
setting credit  is  to  account  108,  dues  apportioned. 

At  the  end  of  the  year  the  balance  remaining  in  this  account 
is  carried  as  a  reserve. 

Account  81     Reserve  for  Depreciation  of  Building 
Account  82     Reserve  for  Depreciation  of  Furniture  and  Fix- 
tures 

These  are  the  ordinary  depreciation  reserve  accounts,  credited 
each  month  with  the  amount  of  depreciation  charged  to  oper- 
ations during  the  period  and  charged  with  the  depreciation 
reserved  on  items  sold  or  replaced. 

Account  83  Reserve  for  Members'  Doubtful  Accounts. — 
At  the  end  of  each  month  this  account  is  credited  with  1/12 


ASSETS  AND  LIABILITIES  199 

of  the  estimated  losses  on  account  of  members'  doubtful  ac- 
counts for  the  year,  the  offsetting  debit  being  to  account  91. 
The  account  is  charged  for  the  actual  accounts  not  collected, 
the  offsetting  credit  being  to  account  4. 

At  the  end  of  the  year  if  the  balance  of  this  account  is  a 
debit,  indicating  that  accounts  charged  off  have  been  in  excess 
of  the  amount  reserved,  the  balance  is  charged  to  surplus  as  the 
reserve  for  losses  of  this  kind  is  set  up  from  surplus  instead  of 
being  charged  to  operations.  If  there  is  a  credit  balance  indi- 
cating that  an  excess  amount  has  been  reserved  for  losses,  the 
balance  is  allowed  to  remain. 

Account  84  Reserve  for  Members'  Unpaid  Dues. — At  the 
close  of  each  month  this  account  is  credited  for  the  amount 
of  dues  falling  due  in  the  current  month  which  are  still  un- 
paid, the  offsetting  debit  being  to  account  5.  It  is  charged 
with  the  amount  of  cash  received  on  account  of  previously  unpaid 
dues,  the  offsetting  credit  being  to  account  80.  It  is  also  charged 
with  the  unpaid  dues  of  members  who  have  been  dropped,  the 
offsetting  credit  being  to  account  5. 

At  the  end  of  the  period  the  credit  balance  of  this  account 
should  equal  the  debit  balance  of  account  5. 

Account  85  Reserve  for  Members'  Unpaid  Assessments. — 
This  account  is  operated  in  the  same  way  as  account  84,  the 
income  account  being  87,  and  at  the  end  of  the  month  the 
credit  balance  of  account  85  should  equal  the  debit  balance  of 
account  6. 

Account  86  Reserve  for  Redemption  of  Debentures. — 
Credits  to  this  account  are  made  by  journal  entry  charging  sur- 
plus at  the  same  time  funds  are  turned  over  to  the  trustees 
and  charged  to  account  15.  The  purpose  of  this  account  is  to 
set  aside  from  surplus  a  reserve  for  the  redemption  of  the  out- 
standing debenture  notes  to  insure  retirement  in  accordance 
with  the  agreement  under  which  the  notes  were  issued. 

Account  87  Assessment  Fund. — When  assessments  have 
been  levied  and  are  paid  the  amount  received  on  account  of  the 
assessment  is  credited  to  account  87,  the  offsetting  debit  being 
to  cash.  The  account  is  also  credited  through  journal  entry 
for  the  members'  unpaid  assessments,  the  offsetting  debit  being 
to  account  6.  The  account  is  charged  for  assessments  unpaid 


200      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

on  account  of  members  dropped,  the  offsetting  credit  being  to 
account  6. 

It  is  charged  for  the  amount  of  cash  paid  out  on  account 
of  the  purpose  for  which  the  assessment  was  made.  Any  unex- 
pended balance  remaining  in  the  account  is  closed  into  surplus, 
account  91. 

Account  88     Employees'  Benefit  Fund. — This  account  is  an 
offset  to  account  17  representing  the  cash  on  account  of  the 
benefit  fund  in  the  hands  of  the  trustees.     Neither  account  17 
nor  88  appear  in  the  balance  sheet. 
Account  90     Initiation  Fees 
Account  91     Surplus 
Account  92     Profit  and  Loss 

These  are  regular  surplus  accounts,  the  amount  received  for 
initiation  fees  being  kept  in  a  separate  account  from  the  gen- 
eral surplus.  The  profit  and  loss  represents  the  result  of  the 
operations  for  the  period  which  has  not  yet  been  closed  to 
surplus. 

Account  91  is  charged  for  amounts  transferred  to  account 
86,  and  when  the  books  are  closed  at  the  end  of  each  six  months 
period  it  is  charged  or  credited  with  the  net  loss  or  gain  from 
the  operations  of  the  period. 

It  is  credited  for  amounts  transferred  from  account  87,  and 
when  debenture  notes  are  paid  with  the  amount  of  such  pay- 
ments, the  offsetting  debit  being  to  account  86. 

The  credit  balance  of  this  account  represents  accumulated 
profits  to  date. 

The  profit  and  loss  account,  92,  is  credited  at  the  end  of  each 
six  months  period  for  any  profit  there  may  have  been  from 
the  operation  of  the  various  departments  of  the  club,  the  credits 
being  in  the  form  of  closing  entries  from  accounts  100  to  107 
inclusive,  and  at  the  end  of  each  six  months  period  for  the 
balance  of  accounts  108,  160  and  161. 

The  account  is  charged  at  the  end  of  each  six  months  period 
for  any  losses  which  have  been  sustained  in  any  of  the  depart- 
ments, the  offsetting  credit  being  to  accounts  100  to  107  inclu- 
sive; for  the  general  house  expenses  as  shown  by  account  140; 
for  the  expenses  of  committees,  account  141 ;  for  cash  varia- 
tions, account  144;  and  for  interest  charges  for  the  period, 
accounts  142  and  143. 


ASSETS  AND  LIABILITIES  201 

Statement  of  Assets  and  Liabilities. — The  statement  of  assets 
and  liabilities  is  prepared  at  the  close  of  each  month  after  all 
adjusting  entries  have  been  posted  and  the  profit  and  loss  ac- 
counts made  up.  The  information  necessary  for  the  statement 
is  taken  direct  from  the  trial  balance.  The  location  of  the 
various  accounts  in  the  statements  is  clearly  indicated  from  the 
location  in  the  chart  of  accounts,  the  same  designations  being 
used  in  each.  The  sum  of  accounts  1  and  2  is  inserted  as  cash 
on  hand,  no  separation  being  shown. 

The  reserve  for  depreciation  of  permanent  assets  is  deducted 
from  the  corresponding  asset.  The  surplus  account  is  analyzed 
in  detail  on  the  balance  sheet  showing  the  balance  of  the  ac- 
count at  the  beginning  and  the  amounts  added  on  account  of 
initiation  fees  and  from  assessments  transferred. 

The  deductions  from  surplus  are  also  shown  in  detail  and 
consist  of  the  amount  taken  from  surplus  and  set  up  as  a  reserve 
for  doubtful  accounts.  The  net  increase  or  decrease  in  surplus 
is  worked  out  and  extended  as  an  addition  to  or  deduction  from 
the  balance  of  surplus  at  the  beginning  of  the  period  to  arrive 
at  the  total  surplus. 

The  balance  of  surplus  at  the  close  of  the  period  represents 
net  earnings,  initiation  fees  and  assessment  fees  to  date  less 
any  amounts  transferred  to  reserves. 


BOYLSTON 
BALANCE 


ASSETS 

Current  Assets 

Cash  in  Bank  and  on  Hand 
.Members'  Accounts  Receivable 
House  Accounts 
Unpaid  Dues 
Unpaid  Assessments 


Less 
Reserve  for  Doubtful  Accounts 

Inventories 

General  Stores 
Restaurant  Stores 
Wine  Room  Stores 
Cigars  Room  Stores 

Unexpired  Insurance 
Unexpired  Licenses 
Prepaid  Taxes 

Total  Current  Assets 
Permanent  Assets 
Land 
Buildings 

Less 
Reserve  for  Depreciation 

Furniture  and  Fixtures 
General  House 
Accounting  Department 
Rooms  Department 
Restaurant 
Bar 

Cigar  Department 
Billiards  and  Pool  Room 
Barber  Shop 
Bowling  Alleys 
News  Stand 
Machinery 


Less 
Reserve  for  Depreciation 

Paintings,  Books  and  Bric-a-brac 

Total  Permanent  Assets 
Capitalized  Expenditures 

Restaurant  China  and  Glassware 
Restaurant  Linen 
Restaurant  Silver  and  Cutlery 
Bar  Glassware 

Total  Capitalized  Expenditures 
Building  Fund 
Fund  for  Redemption  of  Debentures 

Total  Assets 


**»»  *» 


*»*  *» 
»**  *» 

***  ** 


****  #* 


f****  ** 


CLUB 

SHEET 

—         19- 


LlABILITIES 

Current  Liabilities 
Accounts  Payable 
Accrued  Items 

Wages  and  Salaries 
J*>,        Taxes 

Interest  on  Mortgage 
Interest  on  Debentures 


**# 
*** 


Total  Current  Liabilities 

Capital  Liabilities 
Mortgage  Note 
Debenture  Bonds 

Less 
Unpaid  Subscriptions 


#**#  #* 


Total  Capital  Liabilities 

General  Reserves 

Unapportioned  Annual  Dues 
Members'  Unpaid  Duos 
Members'  Unpaid  Assessments 
Assessments  Funds 
Fund  for  Redemption  of  Debentures 

Total  General  Reserves 
Surplus 

Balance  of  Surplus  Account * 

Balance  of  Initiation  Fees 

Account 


Add 

Net    Profit    for    per 

Income    &   Expense    State- 
ment 

Initiation    Fees    for    — 
Assessments  Transferred 


Less 

Net  Loss  for  -  -  as  per 
Income  &  Expense  State- 
ment ****  ** 

Amount  Reserved  for  Mem- 
bers' Doubtful  Accounts  ***  ** 


Net     Increase — Decrease     in 
Surplus  for  ending 


«««*  ** 


Total  Surplus 


Total  Liabilities 


CHAPTER  XX 

INCOME  ACCOUNTS 

The  accounts  numbered  100  to  107  inclusive  represent  income 
from  the  members  and  are  credited  at  the  end  of  each  month 
for  the  total  amount  of  business  in  each  department  as  shown 
by  the  record  of  daily  business. 

When  the  statements  are  made  up  the  income  as  shown  by 
accounts  100  to  107  inclusive  is  partially  offset  by  the  expenses 
of  the  departments  as  shown  by  accounts  120  to  127.  At  the 
end  of  each  six  months  period  the  debit  balances  of  accounts 
120  to  127  are  closed  into  accounts  100  to  107  inclusive,  and  the 
balances  of  the  latter  accounts  closed  into  profit  and  loss. 

A  detailed  explanation  for  all  of  the  revenue  accounts  seems 
to  be  unnecessary.  We  will,  however,  consider  the  details  of 
the  restaurant  account  in  order  that  we  may  have  an  under- 
standing of  the  principles  involved. 

Account  100  Restaurant  Revenue. — This  account  represents 
the  restaurant  revenue  from  members  and  from  charges  made 
to  other  departments  for  meals  served  to  employees.  The  ac- 
count is  credited  at  the  end  of  each  month  with  the  total  gross 
revenue  as  shown  by  the  footing  of  the  corresponding  column 
in  the  record  of  daily  business. 

The  account  is  charged  with  the  expenses  of  operating  the 
restaurant  as  shown  by  the  debit  balance  of  account  120. 

At  the  close  of  the  six  months  period  the  balance  of  account 
100,  after  being  charged  with  expenses,  account  120,  represents 
the  profit  or  loss  in  the  restaurant  during  the  period  and  is 
closed  into  profit  and  loss. 

Account  108  Dues  Apportioned. — Credit  at  the  close  of 
each  month  for  1/12  of  the  estimated  annual  income  from 
members'  dues.  At  the  close  of  each  six  months  period  the 
balance  of  the  account  represents  income  from  dues  and  is 
closed  into  profit  and  loss. 

Income  and  Expense  Statements. — In  the  preparation  of  the 
monthly  income  and  expense  statements  the  revenue  as  shown 

204 


INCOME  ACCOUNTS  205 

by  the  balances  of  the  above  accounts  before  deducting  expenses 
is  transferred  from  the  trial  balance  to  the  various  departmental 
statements.  No  attempt  is  made  at  this  point  to  prepare  a  con- 
solidated or  general  income  and  expense  statement,  although 
as  a  matter  of  fact,  it  could  be  prepared  by  taking  the  net 
balance  of  the  revenue  accounts  and  showing  the  same  in  the 
income  section  of  the  combined  income  and  expense  statement, 
pages  219  and  220. 

A  detailed  outline  for  the  preparation  of  the  monthly  income 
and  expense  statements  will  be  given  following  the  explanation 
of  the  expense  accounts. 


CHAPTER  XXI 

EXPENSE  ACCOUNTS 

The  accounts  numbered  120  to  127  inclusive  are  general  ledger 
accounts  to  take  care  of  the  departmental  expenses,  and  each  is 
a  controlling  account  for  the  analysis  of  departmental  expenses 
represented  by  subsidiary  accounts  which  have  been  assigned 
numbers  with  a  decimal. 

At  the  end  of  each  month  the  controlling  accounts  are  charged 
with  three  items:  1.  The  total  wages  and  salaries  for  the  month 
as  shown  by  the  monthly  distribution  of  the  payroll,  (credit 
account  65)  ;  2.  For  the  total  supplies  used  in  the  depart- 
ment, (credit  accounts  20  to  23  inclusive)  ;  3.  For  expenses 
chargeable  directly  to  each  department  as  taken  from  the 
voucher  register  and  from  the  monthly  journal  entries. 

The  debit  balances  of  these  accounts  represent  expenses  for 
the  period  and  at  the  end  of  each  six  months  are  shown  in  the 
statements  of  income  and  expenses  and  are  closed  into  the 
department  income  accounts. 

As  in  the  case  of  the  income  accounts,  the  detailed  explanation 
of  each  of  these  departmental  expense  accounts  does  not  seem 
necessary.  We  will,  however,  consider  the  restaurant  expense 
accounts  in  order  that  the  method  of  operation  may  be  clearly 
understood. 

Account  1 20  Restaurant  Salaries  and  Expenses. — This  is 
the  general  ledger  account  to  take  care  of  the  departmental 
expenses  and  is  a  controlling  account  for  the  analysis  of  restau- 
rant expenses,  represented  by  subsidiary  accounts  number  120-1 
to  120-19  inclusive. 

Each  time  a  charge  is  made  to  the  controlling  account,  120,  in 
the  general  ledger,  a  posting  is  also  made  to  the  proper  sub- 
sidiary account  in  the  120  group. 

Debit  at  the  end  of  each  month  with  the  total  wages  and 
salaries  in  the  restaurant  for  the  month  as  shown  by  the  journal 
entry  distributing  the  payroll;  for  the  first  two  years  with  1/12 
of  the  annual  depreciation  estimated  at  25%  on  china  and 

20fi 


EXPENSE  ACCOUNTS  207 

glassware,  linen,  silver  and  cutlery  (see  detail  of  accounts  37, 
38  and  39)  ;  for  1/12  of  the  annual  cost  of  license  fees;  for  15% 
of  the  cost  of  heat,  light,  power  and  protection;  for  15%  of 
the  cost  of  maintenance  of  building ;  30%  of  the  cost  of  laundry ; 
20%  of  management  salaries  and  expenses;  for  20%  of  the 
accounting  department  salaries  and  expenses  (see  journal  entries 
21  to  29  inclusive,  page  224)  ;  and  also  for  expenses  chargeable 
directly  to  the  department  as  shown  by  the  voucher  register. 

The  debit  balance  of  this  account  represents  the  departmental 
expenses  for  the  period  and  appears  on  the  income  and  expense 
statements  as  a  deduction  from  revenue. 

The  balance  of  the  account  is  closed  into  the  revenue  account 
at  the  end  of  the  six  months  period,  and  any  balance  then 
remaining  in  the  revenue  is  transferred  to  profit  and  loss. 

Account  130  Management  Salaries  and  Expenses. — Debit  at 
the  close  of  each  month  for  the  salary  of  the  manager,  his 
assistant,  and  the  clerks  in  his  department,  as  shown  by  the 
journal  entry  distributing  the  payroll ;  for  expenses  chargeable 
to  the  manager 's  department  as  shown  by  the  voucher  register ; 
for  supplies  requisitioned  from  the  general  stores  as  obtained 
from  the  summary  of  stores  requisitions,  and  shown  by  the 
journal  entry  distributing  such  requisitions;  for  a  portion  of 
the  cost  of  heat,  light  and  power;  a  portion  of  the  cost  of 
maintenance  of  building ;  a  portion  of  the  depreciation  of  furni- 
ture and  equipment;  and  for  the  board  of  employees  in  the 
department  as  shown  by  the  summary  of  employees '  meal  tickets. 

The  debits  in  this  account  represent  the  total  expenses  of  the 
manager's  department  for  the  month  and  at  the  close  of  each 
period  the  account  is  distributed  over  the  revenue-producing 
departments,  in  proportion  as  follows: 

Account  120  Restaurant  20% 

Account  121  Bar  15% 

Account  122  Cigars  10% 

Account  123  Billiards  and  pool  5% 

Account  124  Rooms  15% 

Account  125  Barber  shop  and  boot  blacking  5% 

Account  12fi  Bowling  5% 

Account  127  Newspapers  and  periodicals  5% 

Account  140  General  house  expenses  20% 

Total  100% 

The  above  distribution  is  clearly  indicate/!  in  the  monthly 
journal  entries  numbered  21  to  29  inclusive. 


208      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Account  131  Accounting  Department  Expenses. — This  ac- 
count is  charged  from  the  payroll  distribution  for  the  salaries 
of  the  comptroller,  bookkeepers,  etc.  (credit  account  65)  ;  for 
the  supplies  used  (credit  account  20)  ;  for  direct  expenses  as 
shown  by  the  voucher  register;  and  for  a  portion  of  heat, 
light  and  power;  and  a  portion  of  maintenance  of  building. 

The  balance  of  this  account  represents  the  total  expenses  of 
the  department  for  the  month  and  is  distributed  over  the  oper- 
ating departments  as  shown  by  journal  entry  29,  page  224. 

Account  132  Laundry. — Debit  for  the  total  of  the  corre- 
sponding column  in  the  voucher  register  for  the  cost  of  laundry 
services. 

The  balance  of  this  account  is  distributed  over  the  depart- 
ments as  shown  by  journal  entry  27,  page  224. 

Account  133  Heat,  Light  and  Power. — Debit  for  the  salaries 
of  the  engineer,  firemen  and  helpers  as  shown  by  the  monthly 
distribution  of  payroll  and  for  any  direct  expense  including 
fuel  used  as  shown  by  the  voucher  register. 

The  balance  of  this  account  is  distributed  over  the  depart- 
mental accounts  as  shown  by  monthly  journal  entry  25, 
page  224. 

Account  134  Maintenance  of  Building. — This  account  is 
charged  through  journal  entry  for  taxes,  insurance  and  depre- 
ciation and  also  for  any  direct  expenses  as  shown  by  the  voucher 
register. 

The  balance  of  the  account  represents  the  total  expenses  of 
building  maintenance  and  is  distributed  over  the  departmental 
accounts  as  shown  by  journal  entry  26,  page  224. 

Account  140  General  House  Expenses. — Debit  for  general 
house  salaries  including  door  man,  check  boys,  telephone  oper- 
ators, porters,  etc.,  from  the  journal  entry  making  distribution 
of  the  payroll;  for  supplies  requisitioned  as  shown  by  the 
summary  of  requisitions;  for  direct  expenses  as  shown  by  the 
voucher  register;  and  for  a  portion  of  the  management,  account- 
ing, laundry,  heat,  light  and  power,  and  maintenance  of  build- 
ing accounts  as  shown  by  monthly  journal  entries  21  to  29 
inclusive,  page  224. 

The  balance  of  this  account  represents  the  total  expense  of 
operating  the  general  house  department  and  is  shown  on  the 
monthly  statement  as  the  general  house  overhead  expense,  de- 


EXPENSE  ACCOL7NT8  209 

ducted  from  profit  on  the  statement  and  is  closed  into  profit 
and  loss. 

Account  141  Committee  Expenses. — This  account  is  charged 
for  the  direct  expenses  incurred  by  the  committees  as  shown 
by  the  voucher  register  and  for  supplies  used  by  committees. 

The  balance  of  the  account  is  shown  as  a  general  overhead 
expense  and  in  preparing  the  monthly  statements  is  handled  the 
same  as  account  140. 

Account  142     Interest  on  Mortgage  Payable 
Account  143     Interest  on  Outstanding  Debentures 

These  are  the  ordinary  interest  expense  accounts  and  are 
operated  as  such.  They  are  shown  in  the  monthly  statements 
under  the  heading  "other  expenses"  and  the  balances  are  closed 
into  profit  and  loss. 

Account  144  Cash  Variations. — A  brief  explanation  of  this 
account  has  been  given  in  describing  the  cash  received  book, 
form  8.  The  account  is  debited  or  credited  with  the  cash  varia- 
tion as  shown  by  the  corresponding  columns  in  the  cash  book,  and 
the  balance  of  the  account  represents  sundry  income  or  expense 
as  the  case  may  be  due  to  cash  variations  and  is  closed  into 
profit  and  loss. 

Account  150  Cash  Sales. — This  is  a  transit  account,  charged 
at  the  end  of  each  month  with  the  total  cash  sales  as  shown  by 
the  record  of  daily  business,  and  credited  for  the  total  of  the 
corresponding  column  in  the  cash  receipts  book  which  should 
balance  the  account. 

Account  1 60     Cash  Discount  on  Purchases 
Account  161     Interest  on  Bank  Balances 

These  accounts  are  the  same  as  are  found  in  the  ordinary 
trading  concerns;  operated  in  the  same  way,  and  require  no 
detailed  explanation. 

Subsidiary  Departmental  Expense  Account  and  Statements. 
The  subsidiary  departmental  expense  accounts  shown  in  the 
chart  do  not  appear  in  the  general  ledger,  but  are  an  analysis 
of  the  various  departmental  expenses  shown  in  total  by  the 
balance  of  the  controlling  account.  The  entries  in  the  voucher 
register  and  journal  are  analyzed  on  form  7  in  accordance  with 
the  subsidiary  departmental  expense  accounts  listed,  and  the 
details  transferred  to  the  monthly  income  and  expense  state- 
ments. 


210      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

In  preparing  the  monthly  income  and  expense  statements 
the  revenue  in  each  department  is  entered  in  the  departmental 
statement  as  indicated  in  the  preceding  chapter.  The  monthly 
statement  prepared  for  the  restaurant  will  be  outlined  somewhat 
in  detail  although  it  does  not  seem  necessary  to  consider  each 
of  the  other  departments  as  the  procedure  is  the  same. 

The  cost  of  food  supplies  used  in  the  restaurant  is  taken 
from  journal  entry  1  and  salaries  from  journal  entry  2.  The 
detail  of  the  general  expense  is  obtained  from  the  analysis  sheet, 
form  7,  and  corresponds  with  the  subsidiary  accounts,  as  follows : 

3  Board  of  Employees 

4  Ice 

6  Fuel 

7  Stationery  and  Printing 

8  Depreciation  of  China  and  Glassware 

9  Depreciation  of  Linen 

10  Depreciation  of  Silver 

11  Soap  and  Washing  Compound 

12  Uniforms  and  Repairs 

13  Sundry  Repairs 

14  Depreciation  of  Furniture  and  Fixtures 
19  Miscellaneous  Expenses 

The  indirect  expenses  representing  apportionment  of  man- 
agement, accounting,  laundry,  heat,  light  and  power,  and  main- 
tenance expense  are  the  balances  of  subsidiary  accounts  15  to 
18  inclusive  and  represent  the  amounts  distributed  through 
journal  entries  25  to  29  inclusive. 


EXPENSE  ACCOUNTS 

BOYLSTON  CLUB 
ANALYSIS  OF  DEPARTMENTAL  INCOME  AND  EXPENSES 

MONTH  OF  19— 

RESTAURANT 


211 


Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 

From  Members 

Board  of  Employees 

Total  Revenue 

Food  Supplies  Used 

Salaries  and  Wages 

General  Expenses 

Board  of  Employees 

Ice 

Fuel  Used 

Stationery  and  Printing 

Depreciation  of  China  and  Glass- 

ware 

Depreciation  of  Linen 

Depreciation  of  Silver 

Soap  and  Washing  Compound 

Uniforms  and  Repairs 

Sundry  Repairs 

Depreciation    of     Furniture    and 

Fixtures 

Miscellaneous  Expenses 

Indirect  Expenses 

Management     Salaries     and     Ex- 

penses —  20% 

Accounting  Department  Expenses 

—20% 

Laundry—  30% 

Heat,   Light,   Power   and   Protec- 

tion— 15% 

Maintenance  of  Building  —  15% 

Total  Supplies  and  Expenses 

Net  Profit 

212      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

BAB 


Current 
Month 


Current 

Year  to 

Date 


Same 

Period 

Last  Year 


Revenue 

From  Members 

Supplies  Used 
Salaries  and  Wages 

General  Expenses 
Board  of  Employees 
Ice 

License 

Stationery  and  Printing 
Depreciation   of  Glassware 
Uniforms  and  Repairs 
Depreciation  of  Furniture  &  Fix- 
tures 

Sundry  Repairs 
Miscellaneous  Expenses 

Indirect  Expenses 

Management     Salaries     and     Ex- 
penses— 15% 
Accounting  Department  Expenses 

—15% 

Laundry — 10% 

Heat,    Light,    Power   and    Protec- 
tion— 5% 
Maintenance  of  Building — 5% 

Total  Supplies  and  Expenses 
Net  Profit 


EXPENSE  ACCOUNTS 

ClGAKS 


213 


Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 
From  Members 

Supplies  Used 

Salaries  and  Wages 

General  Expenses 
Board  of  Employees 
Stationery  and  Printing 
Depreciation  of  Fixtures 
Miscellaneous  Expenses 

Indirect  Expenses 
Management     Salaries     and     Ex- 
penses —  10% 
Accounting  Department  Expenses 
—10% 
Maintenance  of   Building  —  5% 

Total  Supplies  and  Expenses 
Net  Profit 

Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 
From  Members 

Salaries  and  Wages 

General  Expenses 
Board  of  Employees 
Supplies  Used 
Stationery  and  Printing 
Uniforms  and  Repairs 
Repairs  to  Equipment 
Depreciation  of  Equipment 
Miscellaneous  Expenses 

Indirect  Expenses 
Management  Salaries  &  Expenses 
—5% 
Accounting  Department  Expenses 
—5% 
Heat,  Light  and  Protection  —  5% 
Maintenance  of  Building  —  5% 

Total  Expenses 
Net  Profit 

EXPENSE  ACCOUNTS 
ROOMS  DEPABTMENT 


215 


Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 

From  Members 

Salaries  and  Wages 

General  Expenses 

Board  of  Employees 

Housekeeping   Supplies  Used 

Depreciation  of  Linen 

Stationery  and  Printing 

Uniforms  and  Repairs 

Depreciation  of  Furnishings 

Miscellaneous  Expenses 

Indirect  Expenses 

Management     Salaries     and     Ex- 

penses —  15% 

Accounting  Department  Expenses 

—15% 

Laundry  —  30% 

Heat,   Light,   Power   and   Protec- 

tion— 25% 

Maintenance  of  Building  —  25% 

Total   Expenses 

Net  Profit 

216      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

BARBER  SHOP 


Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 
From  Members 

Salaries  and  Wages 

General  Expenses 
Board  of  Employees 
Supplies  Used 
Stationery  and  Printing 
Depreciation  of  Linen 
Uniforms  and  Repairs 
Depreciation  of  Furnishings 
Miscellaneous  Expenses 

Indirect  Expenses 
Management     Salaries     and     Ex- 
penses —  5% 
Accounting  Department  Expenses 
—5% 
Laundry  —  20% 
Heat,   Light  and  Protection  —  5% 
Maintenance  of  Building  —  5% 

Total  Expenses 
Net  Profit 

EXPENSE  ACCOUNTS 
BOWLING 


217 


Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 
From  Members 

Salaries  and  Wages 

General  Expenses 
Board  of  Employees 
Supplies  Used 
Stationery  and  Printing 
Repairs  to  Equipment 
Depreciation  of  Equipment 
Miscellaneous  Expenses 

Indirect  Expenses 
Management     Salaries     and     Ex- 
penses —  5% 
Accounting  Department  Expenses 
—5% 
Heat,  Light  and  Protection  —  5% 
Maintenance  of  Building  —  5% 

Total  Expenses 
Net  Profit 

218      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 
NEWSPAPERS  AND  PERIODICALS 


Current 
Month 

Current 
Year  to 
Date 

Same 
Period 
Last  Year 

Revenue 

From  Members 
Supplies  Used 

Salaries  and  Wages 

General  Expenses 
Board  of  Employees 
Stationery  and  Printing 
Depreciation  of  Fixtures 
Miscellaneous  Expenses 

Indirect  Expenses 
Management     Salaries     and     Ex- 
penses —  5% 
Accounting  Department  Expenses 
—5% 
Maintenance  of  Building  —  5% 

Total  Supplies  and  Expenses 
Net  Profit 

EXPENSE  ACCOUNTS 

BOYLSTON  CLUB 

MONTHLY  INCOME  AND  EXPENSE  STATEMENT 
MONTH  OF  19— 


219 


Current 

Month 


Current 

Year  to 

Date 


Same 

Period 

Last  Year 


INCOME 

Net  Profit  from  Departments 
Restaurant 
Bar 
Cigars 

Billiards  and   Pool 
Rooms 
Barber  Shop 
Bowling 
Newspapers  and  Periodicals 

Total    Net    Profit    from    De 
partments 

Other  Income 
Annual  Dues 
Discounts  Received 
Interest  on  Bank  Balances 

Total  Other  Income 
Total  Income 


GENERAL  EXPENSES 

General  House  Expenses 
Salaries  and  Wages 
Board  of  Employees 
Supplies  Used 
Stationery  and  Printing 
Postage 

General  House  Repairs 
Depreciation    of    House    Furnish- 
ings 

Books  and  Bric-a-brac 
Newspapers  and  Periodicals 
Uniforms  and  Repairs 
Telephone  and  Telegrams 
Miscellaneous  Expenses 

Carried  forward 


220      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 
MONTHLY  INCOME  AND  EXPENSE  STATEMENT 
MONTH  OF  19—   (Cont.) 


Current 
Month 


Current 

Year  to 

Date 


Same 

Period 

Last  Year 


GENERAL  EXPENSES    (Cont.) 
Brought  forward 

General  House  Expenses    (Cont.) 

Management  Salaries  and  Ex- 
penses— 20% 

Accounting  Department  Expenses 
—20% 

Laundry — 1 0% 

Heat,  Light,  Power  and  Protec 
tion — 30% 

Maintenance  of  Building — 30% 

Expenses  of  Committees 
Board  of  Governors 
Membership 
Entertainment 
Art  and  Library 
Publicity 
Civic  Secretary 
Other  Organizations 

Other  Expenses 

Interest  on  Mortgage  Payable 
Interest  on  Debentures 
Cash  Variations 

Total  General  Expenses 
Net  Profit— Loss 


EXPENSE  ACCOUNTS  221 

After  the  departmental  operating  statements  have  been  made 
up  and  the  net  profit  or  loss  in  each  department  ascertained,  the 
amount  of  such  profit  or  loss  is  transferred  from  the  depart- 
mental statement  to  the  general  statement.  If  a  department 
shows  a  loss  instead  of  a  profit,  such  loss  is  indicated  in  red  ink. 

The  reason  for  preparing  a  departmental  statement  and  tak- 
ing the  information  from  the  departmental  statement  to  the 
general  statement  instead  of  using  the  ledger  balances  is  that 
the  statements  are  prepared  monthly  while  the  books  are  closed 
only  semi-annually,  therefore  it  would  be  very  difficult  to  take 
the  information  direct  from  the  trial  balance  inasmuch  as  the 
expenses  in  each  department  would  not  be  closed  to  the  revenue 
account.  In  other  words,  at  the  end  of  six  months  it  would  be 
possible  to  prepare  general  statements  direct  from  the  ledger 
using  the  balance  of  the  departmental  account  to  show  the 
profit  or  loss  in  the  department,  but  as  this  is  possible  or  con- 
venient only  once  in  six  months  the  practice  of  preparing  depart- 
mental statements  first  and  taking  the  information  therefrom 
to  the  general  statement  has  been  adopted. 

The  other  income  on  the  general  statement  is  taken  from  the 
balances  of  the  corresponding  general  ledger  accounts;  the  in- 
come from  dues  from  journal  entry  12;  discounts  received  from 
account  160;  and  interest  on  bank  balances  from  account  161. 

The  general  house  expenses  are  taken  from  the  analysis  sheet, 
form  7,  and  the  proportion  of  overhead  is  taken  from  journal 
entries  25,  26,  27,  28  and  29. 

The  expense  of  committees  is  the  balance  of  account  141, 
analyzed  on  form  7.  The  other  expenses  are  interest  on  mort- 
gage payable  from  account  142,  interest  on  debentures  from 
account  143,  and  cash  variation  from  account  144. 

The  net  profit  or  loss  for  the  period  is  ascertained,  which 
amount  is  inserted  in  the  statement  of  assets  and  liabilities. 

It  will  be  noted  that  the  monthly  operating  statements  allow 
for  comparison  with  the  same  period  last  year  which  comparison 
may  be  used  as  a  guide  in  conducting  the  affairs  of  the  club. 

The  monthly  adjusting  entries  are  shown  on  the  following 
pages: 


222      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

BOYLSTON  CLUB 
MONTHLY  JOURNAL  ADJUSTING  ENTRIES 

1  Restaurant  Salaries  and  Expenses  (120) 

To  Restaurant  Stores   (21) 

Cost  of  food  supplies  used  during  the  month 

2  Bar  Salaries  and  Expenses   (121) 

To  Wine  Room  Stores    (22) 

Cost  of  wines  used  during  the  month 

3  Salaries  and  Expenses  ( 122 ) 

To  Cigar  Room  Stores   (23) 

Cost  of  cigars  and  tobacco  used  during  the  month 

4  Maintenance  of  Building  (134) 

To  Reserve  for  Depreciation  of  Building  (81) 

One-twelfth  of  estimated  annual  depreciation 

u         Restaurant  Salaries  and  Expenses  (120) 

To  Restaurant  China  and  Glassware  (37) 
Restaurant  Linen  (38) 
Restaurant  Silver  and  Cutlery  (39) 

One-twelfth  of  annual  depreciation  estimated  at  25% 

Note:  The  above  entry  is  made  monthly  until  the 
asset  accounts  involved  stand  on  the  books  at  one-half 
the  original  charges  to  these  accounts;  thereafter  they 
are  not  adjusted,  all  supplies  requisitioned  from 
stock  being  charged  directly  to  the  restaurant  ex- 
penses account. 

6  Bar  Salaries  and  Expenses  ( 121 ) 

To  Bar  Glassware  (41) 

One-twelfth  of  annual  depreciation  estimated  at  25% 

Note:  The  above  entry  is  made  monthly  until  the 
asset  account  involved  stands  on  the  books  at  one-half 
the  original  charge  to  this  account;  thereafter  it  is  not 
adjusted,  all  supplies  requisitioned  from  stock  being 
charged  directly  to  the  bar  expenses  account 

7  Maintenance  of  Building  (134) 

To  Unexpired  Insurance  (50) 

That  part  of  the  cost  of  insurance  policies  outstand- 
ing applicable  to  the  current  month 

8  Maintenance  of  Building  (134) 

To  Prepaid  Taxes  (51) 
Accrued  Taxes  (66) 

To  charge  into  the  expenses  for  the  current  month  the 
taxes  applicable  to  it 

0     Restaurant  Salaries  and  Expenses  (120) 
Bar  Salaries  and  Expenses  (121) 

To  Unexpired  Licenses  (52) 

One-twelfth  of  the  annual  cost  of  license  fees 

10 


EXPENSE  ACCOUNTS  223 

11  Interest  on  Debentures  (143) 

To  Interest  Accrued  on  Debentures  (68) 

Interest  on  debentures  accrued  for  the  month 

12  Members'  Dues  Unapportioned  (80) 

To  Members'  Dues  Apportioned   (108) 

One-twelfth  of  estimated  annual  revenue  from  mem- 
bership dues 

13  Surplus   (91) 

To  Reserve  for  Members'  Doubtful  Accounts   (83) 

One-twelfth  of  estimated  loss  for  the  year  on  account 
of  bad  debts 

14  Members'  Unpaid  Dues   (5) 

To  Reserve  for  Members'  Unpaid  Dues   (84) 

The  annual  fees  falling  due  during  the  month  and  re- 
maining unpaid  at  the  end  of  the  month 

15  Reserve  for  Members'  Unpaid  Dues    (84) 

To  Members'  Dues  Unapportioned    (80) 

To  transfer  the  amount  of  the  payments  for  the  month 
on  account  of  previously  unpaid  annual  dues  to  the 
members'  dues  Unapportioned  account 

10         Members'  Unpaid  Assessments   (6) 

To  Reserve  for  Members'  Unpaid  Assessments   (85) 

The  amount  of  the  assessments  falling  due  during  the 
month  but  remaining  unpaid  at  the  end  of  the  month 

17  Reserve  for  Members'  Unpaid  Assessments  (85) 

To  Assessment  Funds    (87) 

To  transfer  the  amount  of  the  payments  for  the  month 
on  account  of  previously  unpaid  assessments  to  the  as- 
sessment funds  account 

18  Reserve  for  Members'  Unpaid  Dues    (84) 

To  Members'  Unpaid  Dues   (5) 

To  charge  against  the  reserve  for  unpaid  dues  the  total 
amount  of  annual  dues  previously  charged  to  members 
who  have  been  dropped  from  membership  during  the 
month 

19  Reserve  for  Members'  Unpaid  Assessments   (85) 

To  Members'  Unpaid  Assessments   (6) 

To  charge  against  the  reserve  for  unpaid  assessments 
the  total  amount  of  assessments  previously  charged  to 
members  who  have  been  dropped  from  membership 
during  the  month 

20  Newspapers  and  Periodicals  Salaries  and  Expenses   (127) 

To  Accounts  Payable    (60) 

To  adjust  the  newspapers  and  periodicals  revenue  ac- 
count so  that  it  will  contain  the  proper  charge  for 
the  cost  of  periodicals  sold  but  for  which  no  liability 
has  been  brought  upon  the  books 


224      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


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CHAPTER  XXII 

CENTRAL  LEATHER  COMPANY 
GENERAL  DISCUSSION 

The  basic  idea  on  which  the  system  for  the  Central  Grocery 
Company  was  constructed  was  the  elimination  of  detailed  ac- 
counts in  the  general  ledger,  such  detail  being  carried  on  analysis 
sheets  in  records  apart  from  the  ledger  and  classed  as  "analysis 
of  expenses  records." 

The  feature  which  is  to  be  brought  out  in  this  system  is  the 
carrying  in  the  general  ledger  of  detailed  inventory  and  cost 
accounts. 

This  corporation  is  engaged  in  the  business  of  purchasing 
whole  sides  of  leather,  cutting  and  sorting  the  sides  so  purchased, 
and  reselling  to  the  different  classes  of  trade  requiring  the 
various  grades  of  leather  obtained  through  the  cutting  and  sort- 
ing operation.  The  concern  does  not  operate  a  tannery  and  em- 
ploys no  labor  except  that  which  is  necessary  to  operate  the 
cutting  room. 

The  purchases  are  made  in  large  lots  which  are  put  into  the 
cutting  room  in  quantities  sufficient  to  keep  the  department 
in  operation,  a  very  careful  record  being  kept  of  sides  put  in  and 
product  received  from  the  cutting  room,  which  is  considered 
finished  stock.  The  inventory  consists  of  whole  sides,  still  intact, 
and  of  leather  which  has  been  cut,  sorted  and  reclassified,  which, 
through  the  cutting  process  has  accumulated  in  addition  to  its 
original  cost,  labor  and  expense  incident  to  the  cutting  opera- 
tions. 

In  arranging  the  chart  of  accounts  an  entirely  different  classi- 
fication is  set  up,  not  with  the  idea  that  it  is  to  be  used  as  a 
model,  but  simply  as  illustrating  the  arrangement  used  by  the 
corporation  showing  one  of  the  many  variations  which  it  is  pos- 
sible to  have  when  considering  a  varied  number  of  systems. 

The  corporation's  investment  in  equipment  consists  of  land 
and  buildings,  benches  and  tools  in  the  cutting  room,  office  furni- 
ture and  equipment,  horses,  wagons,  harnesses,  etc.,  necessary 

225 


226      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

for  the  conduct  of  the  business,  and  is  no  different  from  that 
which  may  be  found  in  any  small  manufacturing  or  trading 
concern. 

A  review  of  the  chart  of  accounts  on  the  following  pages 
brings  out  the  fact  that  a  more  detailed  classification  of  expenses 
is  made  in  this  business  than  we  have  heretofore  seen.  The 
groups  headed  "administrative,"  "office,"  "selling,"  "floor," 
"manufacturing,"  "stable,"  and  "maintenance"  are  controlling 
accounts  in  the  general  ledger,  the  analysis  being  made  on 
analysis  sheets,  the  postings  to  which  are  made  on  the  same 
general  plan  as  those  for  expenses  in  the  Central  Grocery 
Company. 

The  company  determines  profits  monthly,  and  all  purchases 
are  brought  on  each  month,  whether  the  goods  are  received  or 
not,  provided  the  invoice  has  been  received.  The  goods  in  transit 
or  not  received  are  brought  on  at  cost  plus  the  estimated  freight 
as  will  be  shown  in  considering  the  voucher  register. 

CENTRAL  LEATHER  COMPANY 

LIST  OF  GENERAL  LEDGER  ACCOUNTS 

FIXED  ASSETS 

A-l  Land 

A-2  Buildings 

A-3  Cutting  Department — Machinery  and  Equipment 

A-4  General  Furniture  and  Fixtures 

A-5  Office  Furniture  and  Fixtures 

A-6  Horses,  Trucks  and  Harnesses 

A-7  Cutting  Department — Small  Tools 

CURRENT  ASSETS 

B-l         Cash  in  Banks 

Imprest  Cash  Fund 
B-3         Accounts   Receivable 
B-4         Notes  Receivable 
B-5         Accrued  Interest  on  Notes  Receivable 

INVENTORIES 

C-l         Purchases    (Leather) 

C-2         Finished  Goods — Cutting  Department 

C-3         Work  in  Process — Cutting  Department 

C-4         Office  Supplies  on  Hand 

C-5         Stable  Supplies  on  Hand 

DEFERRED  ASSETS 

D-l         Insurance  Unexpired 

D-2         Taxes  Prepaid 

D-3         Interest  Prepaid  on  Notes  Payable 

FIXED  LIARILITIES 

E-l         Mortgage  Payable 


CENTRAL  LEATHER  COMPANY  227 

CURRENT  LIABILITIES 

F-l  Accounts  Payable 

F-2  Notes  Payable 

F-3  Accrued  Interest  on  Mortgage  Payable 

F-4  Accrued  Interest  on  Notes  Payable 

F-5  Taxes  Accrued 

F-6  Accrued  Wages  and  Salaries 

F-7  Freight  pn  Purchases  Not  Paid 

RESERVE  ACCOUNTS 

G-l  Reserve  for  Depreciation  of  Buildings 

G-2  Reserve  for  Depreciation  of  Machinery  &  Equipment 

G-3  Reserve  for  Depreciation  of  Furniture  &   Fixtures 

G-4  Reserve  for  Depreciation  of  Horses,  Trucks  &  Harnesses 

G-5  Reserve  for  Loss  on  Bad  Debts 

NET  WORTH 

H-l  Capital  Stock,  Common 

H-2  Capital  Stock,  Preferred 

H-3  Surplus 

H-4  Loss  and  Gain — General 

H-5  Loss  and  Gain — Cutting  Department 

OPERATING  ACCOUNTS 

J-l  Cutting  Department 

J-2  Sales 

J-3  Cost  of  Sales 

ADMINISTRATIVE  EXPENSES 

K-l  Administrative  Salaries 

K-2  Telephone  and  Telegrams 

K-3  Collection  and  Exchange 

OFFICE  EXPENSES 

L-l  Salaries 

L-2  Supplies  Used 

L-3  Depreciation  of  Furniture  and  Fixtures 

L-4  Light 

L-5  Heat 

L-6  Rent 

SELLING  EXPENSES 

M-l  Salaries 

M-2  Traveling  Expenses 

M-3  Advertising 

M-4  Telephone  and  Telegrams 

M-5  Commissions 

FLOOR  EXPENSES 

N-  1  Salaries  and  Wages 

N-  2  Freight  and  Cartage  Inward 

N-  3  Freight  and  Cartage  Outward 

N-  4  Boxes,  Bags,  Nails,  etc. 

N-  fj  Light 

N-  6  Heat 

N-  7  Rent 

N-  8  Depreciation  of  General  Furniture  and  Fixtures 

N-  9  Insurance  on  General  Furniture  and  Fixtures 

N-10  Liability  Insurance 

N-ll  Insurance  on  Merchandise 

N-12  Taxes  on  General  Merchandise  and  Equipment 

N-13  Burglary  Insurance 

N-14  Corporation  Franchise  Tax 

N-15  Income  Tax 


228      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

MANUFACTURING  EXPENSES 

O-  1  Purchases 

O-  2  Freight  and  Cartage  Inward 

O-  3  Direct  Labor 

0-  4  Indirect  Labor 

O-  5  Insurance  on  Merchandise 

O-  6  Insurance  on  Machinery  and  Equipment 

O-  7  Depreciation  of  Machinery  and  Equipment 

O-  8  Light 

O-  9  Power 

O-10  Heat 

O-ll  Rent 

O-12  Taxes  on  Merchandise  and  Equipment 

0-13  Repairs  to  Equipment 

O-14  Liability  Insurance 

O-15  Tools  and  Supplies  Used 

STABLE  EXPENSES 

P-  1  Salaries  and  Wages 

P-  2  Supplies  Used 

P-  3  Light 

P-  4  Heat 

P-  5  Rent — Board  of  Horses 

P-  6  Depreciation  of  Horses,  Trucks  and  Harnesses 

P-  7  Insurance  on  Stable  Equipment 

P-  8  Taxes  on  Equipment 

P-  9  Repairs  to  Equipment 

P-10  Horse  Shoeing  and  Veterinary  Charges 

MAINTENANCE  OF  REAL  ESTATE 

R-l         Depreciation  of  Buildings 
R-2         Insurance  on  Buildings 
R-3         Taxes  on  Real  Estate 
R-4         Repairs  to  Buildings 
R-5         Wages  of  Watchman 

OTHER  INCOME 

S-l  Interest  Received 
S-2  Discounts  Earned 
S-3  Rent  Income 

OTHER  CHARGES 

T-l         Interest  Paid 
T-2         Discounts  Allowed 
U-l         Cash  Sales 

The  list  of  forms  shown  on  the  following  page  includes  all 
the  forms  in  use  by  the  corporation.  Samples  are  included  for 
only  those  forms  which  are  peculiar  to  the  problem  under  dis- 
cussion, as  the  general  records  follow  much  the  same  outline  as 
we  have  discussed  in  previous  systems. 

In  the  discussion  emphasis  will  be  placed  on  the  voucher  regis- 
ter, sales  and  cost  journal,  time  card,  stock  requisition  and  daily 
cutting  report. 


CENTRAL  LEATHER  COMPANY  229 


CENTRAL  LEATHER  COMPANY 

LIST  OF  FORMS 

PURCHASE  RECORDS  FORM  No. 

Purchase  Order  1 

Goods  Received  Sheet  2 

Voucher  3 

Voucher  Register  4 

Voucher  Index  5 

SALES  RECORDS 

Order  Blank  6 

Credit  Memorandum  7 

Sales  and  Cost  Journal  8 

Sales  Returns  and  Allowances  9 

Bill  Head  10 

Monthly  Statement  11 

FINANCIAL  RECORDS 

Cash  Receipts  12 

Cash  Payments  13 

GENERAL  RECORDS 

Journal  14 

General  Ledger  15 

Customers'  Ledger  16 

Trial  Balance  Book  for  General  Ledger  17 

Trial  Balance  Book  for  Customers'  Ledger  18 

Pay  Roll  Book  19 

Salesmen's  Trip  Report  20 

Inventory  Sheet  21 

Monthly  Profit  and  Loss  Statement  22 

Monthly  Balance  Sheet  23 

CUTTING  DEPARTMENT  RECORDS 

Stock  Requisition  24 

Direct  Labor  Time  Card  25 

Daily  Cutting  Report  26 

Form  2  Goods  Received  Sheet. — This  is  a  form  which  is 
made  out  when  goods  are  received  from  the  transportation  com- 
panies. It  is  prepared  in  duplicate,  the  original  being  sent  to 
the  bookkeeping  department,  where  it  is  compared  with  the  in- 
voice. The  duplicate  is  sent  to  the  stockroom  and  shows  the 
weights  of  the  various  lots  and  the  invoice  cost  per  pound. 
After  being  entered  on  the  inventory  sheet,  form  21,  the  dupli- 
cate is  forwarded  to  the  office,  where  it  is  filed  with  the  original. 

Form  4  Voucher  Register. — It  might  be  well  in  passing  to 
call  particular  attention  to  this  form,  not  that  it  differs  essen- 
tially from  the  ones  we  have  previously  discussed,  but  on  account 
of  the  two  columns  headed  " freight  inward."  It  will  be  noted 
that  one  is  a  credit  while  the  other  is  a  debit. 

The  freight  on  goods  in  transit  is  considered  a  part  of  the 


230      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

cost  of  purchases,  therefore,  when  an  entry  is  made  in  the 
voucher  register  at  the  end  of  the  month  for  goods  in  transit, 
there  are  two  credits,  one  to  accounts  payable  for  the  amount 
of  the  invoice,  and  one  to  freight  inward  for  the  estimated 


f;.™    HO  2 

CENTRAL  LEATHER  CO 
TALLY  SHEET 

FROM 

Nn 

flATr 

VIA                                                                                                                Fnrjr.HT    $ 

WEIGHTS 

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TOTAL 

CHECKED    BY 

SHIP 
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TOTA 

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TAN 

MMl 

•AR  ED    WITH 
CE   COST  PEI 

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L  COST  PER 

)  OH  IMVEMT 

an 

LB  

Form  2 

amount  of  freight  on  the  shipment.  This  entry  operates  to 
charge  purchases  account  C-l  for  the  cost  of  goods  in  transit, 
plus  the  estimated  freight,  and  credit  account  F-l  for  the  invoice 
payable,  and  account  F-7  for  the  estimated  amount  of  freight. 

During  the  next  month,  when  the  freight  is  actually  paid, 
it  is  charged  through  the  voucher  register  against  account  F-7. 

Form  8  Sales  and  Cost  Journal. — The  sales  and  cost  journal 
described  in  connection  with  the  Packford  Auto  Sales  Com- 
pany was  used  for  posting  to  the  detailed  sales  and  cost  ac- 
counts. In  this  system  the  columns  are  posted  only  to  and 
including  the  cutting  department.  The  balance  of  the  columns, 
headed  "strips,"  "ends,"  "shanking,"  "butts,"  "shoulders," 
"bends,"  "backs"  and  "miscuts."  are  not  posted  to  the  general 
ledger  accounts  but  are  used  in  making  up  statements  of  opera- 
tions to  show  the  revenue  received  from  each  class  of  leather 
turned  out  by  the  cutting  department. 

At  the  end  of  the  month  the  journal  is  footed  and  the  columns 
posted  as  follows: 


CENTRAL  LEATHER  COMPANY 


231 


232      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING- 


CENTRAL  LEATHER  COMPANY 


233 


Accounts  Receivable,  debit  account  B-3 

Cash  Sales,  debit  account  B-l 

Leather  Revenue,  credit  account  J-2 

Leather  Cost,  debit  account  J-3,  credit  account  C-l 

Cutting  Department  Revenue,  credit  account  J-2 

Cutting  Department  Cost,  debit  account  J-3,  credit  account  C-2 

As  stated  above,  the  balance  of  the  columns  on  this  form  are 
not  posted  to  ledger  accounts.  The  amounts  entered  in  the 
columns  are  an  analysis  of  the  totals  in  the  leather  and  cutting 
department  columns. 


CENTRAL  LEATHER  CO 
CUTTIflG  DEPI  -  STOCK  REQUISITION 


DATE. 


THE   FOLLOWING  STOCK  HAS  BEEN  DELIVERED  TO  THE   CUTTine   DEPARTMENT 


FROM 

LOT    MO. 


COST 

PER  LB 


DELIVERED    BY 


ENTERED   ON    INVENTORY 


Form  24 

Form  24  Stock  Requisition. — This  requisition  is  kept  in  the 
stockroom  and  is  made  out  each  time  a  supply  of  material  is 
turned  over  to  the  cutting  room.  The  summary  of  stock  requi- 
sitions forms  the  basis  of  a  journal  entry  transferring  from 
account  C-l  to  account  J-l  the  material  which  is  transferred 
from  the  stockroom  to  the  manufacturing  or  cutting  department. 

Form  25  Direct  Labor  Time  Card. — This  time  card  is  made 
out  by  the  superintendent  of  the  cutting  department  and  shows 
the  employee's  name  and  number.  The  operations  in  the  room 
are  classified  and  opposite  each  classification  is  the  time  the 
work  was  begun,  finished  and  elapsed  time,  which,  multiplied 
by  the  rate,  gives  the  cost  for  time  worked.  In  the  event  that 
the  work  is  paid  on  the  piece  work  basis,  the  number  of  pieces 
times  the  rate  gives  the  cost. 

The  time  card  is  forwarded  to  the  office  and  entered  on  the 
payroll,  serving  both  as  a  basis  for  paying  the  employee  and 
computing  the  cost  of  work  performed  in  the  cutting  depart- 
ment. 

Form  26  Daily  Cutting  Report. — This  form  is  made  out  by 
the  foreman  of  the  cutting  room,  and  in  the  column  headed 


234      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


"product"  the  items  turned  out  are  listed  with  the  pounds  of 
leather  used,  the  lot  from  which  used,  and  the  cost  as  shown 
by  the  invoice  plus  the  freight. 

The  product  is  entered  in  the  proper  column  with  the  average 


"""""*                            CENTRAL  LEATHER  CO. 
CUTTING  DEPARTMENT  -TIME  CARD 

n»TF 

Nrt                            R.-rr 

BEGUM 

rmiSHCD 

ELAPSED 

Tine 

COST 

TIME  WORK 

PIECE  WORK 

Ho 

COST 

currmo 

TRIMMING 

SORVIMO 

PACWnG 

TOTALS 

CMTERED  OH  PAYROLL 

Form  25 

weight  from  which  the  charge  is  computed.  The  charge  is  that 
proportion  of  the  original  cost  allocated  to  each  kind  of  mate- 
rial turned  out,  plus  the  labor  and  overhead  charged  in  manu- 
facturing or  cutting.  At  the  close  of  the  month  the  reports  are 
summarized  and  form  the  basis  of  a  journal  entry  debiting  ac- 
count C-2  and  crediting  J-l. 


CENTRAL  LEATHER  COMPANY 


235 


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CHAPTER  XXIII 

GENERAL  LEDGER  ACCOUNTS 

The  general  accounts  used  in  this  system  do  not  differ  mate- 
rially from  the  ordinary  asset  and  liability  and  revenue  and 
expense  accounts,  therefore  no  detailed  explanation  seems  neces- 
sary. Attention  has  already  been  called  to  the  variation  from 
standard  practice  in  the  classification  of  accounts  but  other 
than  this  no  special  mention  need  be  made  except  in  the  case 
of  those  accounts  peculiar  to  the  business. 

Account  C-i  Purchases  (Leather). — All  purchases  of  leather, 
including  freight,  are  charged  to  this  account  at  the  close  of 
the  month  from  the  voucher  register.  At  the  close  of  the  month 
the  account  is  credited  for  the  cost  of  leather  sold  before  sorting 
and  cutting,  and  for  the  cost  of  leather  turned  over  to  the  cut- " 
ting  department,  the  offsetting  debit  being  to  accounts  J-3  and 
J-l  respectively. 

Account  C-2  Finished  Goods — Cutting  Department. — This 
account  is  charged  for  the  finished  goods  turned  out  by  the  cut- 
ting department,  as  shown  by  the  daily  cutting  reports,  which 
include  material,  labor  and  overhead.  The  charge  also  includes 
a  loading  to  bring  the  price  to  what  the  sales  department  would 
pay  if  the  goods  were  purchased  outside,  so  the  cutting  depart- 
ment should  show  a  profit.  The  offsetting  credit  is  to  account  J-l. 

Account  C-3  Work  in  Process — Cutting  Department. — 
This  account  represents  the  work  in  process  in  the  cutting  de- 
partment at  the  end  of  the  month.  No  debits  or  credits  are 
made  to  this  account  during  the  month,  but  at  the  close  of  each 
period  a  physical  inventory  of  the  work  in  process  in  the  cutting 
department  is  taken  and  the  balance  of  account  C-3  adjusted 
in  accordance  therewith,  the  offsetting  debit  or  credit  being  to 
account  J-l. 

Account  D-i  Insurance  Unexpired. — This  account  is  charged 
for  the  cost  of  all  insurance  premiums  paid  and  at  the  close  of 
the  month  a  journal  entry  is  made  crediting  the  account  with 

236 


GENERAL  LEDGER  ACCOUNTS  237 

the  insurance  expired  during  the  month,  and  making  charges 
to  the  following  expense  accounts: 

Insurance  on  merchandise  is  divided  between  account  J-l  and 
account  N-ll ;  insurance  on  buildings,  account  R-2 ;  furniture 
and  equipment,  account  J-l  and  account  N-9 ;  liability,  account 
J-l  and  account  N-10;  burglary,  account  N-13;  trucks  and 
wagons,  account  P-7. 

The  balance  represents  the  unexpired  insurance  premiums 
which  have  been  paid. 

Account  D-2  Taxes  Prepaid. — This  account  does  not  require 
special  explanation  except  to  furnish  the  expense  accounts  to 
which  the  taxes  are  distributed. 

The  tax  on  personal  property  is  distributed  %  to  account  J-l 
and  14  to  account  P-8;  merchandise  and  equipment  to  account 
N-12;  real  estate  to  account  R-3;  corporation  tax  to  account 
N-14 ;  income  tax  to  account  N-15. 

Account  F-7  Freight  on  Goods  in  Transit. — A  brief  outline 
of  this  account  has  been  given  under  the  description  of  the 
voucher  register,  form  4. 

Debit  with  that  portion  of  freight  paid  on  shipments  which 
were  in  transit  at  the  clese  of  the  previous  month  as  will  balance 
the  item  shown  by  the  details  of  shipments  in  transit  entered 
in  the  voucher  register.  Any  variation  in  the  estimate  is  taken 
up  in  the  current  month. 

Credit  for  estimated  freight  on  merchandise  in  transit  at  the 
close  of  the  month  as  shown  by  the  voucher  register. 

The  balance  represents  freight  unpaid  on  goods  in  transit. 

Account  H-5  Loss  and  Gain  Cutting  Department. — This 
account  represents  the  loss  or  gain  each  month  in  the  cutting 
department,  as  indicated  by  the  balance  of  account  J-l.  At  the 
end  of  the  year  the  balance  of  account  H-5  is  transferred  to 
surplus. 

Account  J-i  Cutting  Department. — Debit  for  work  in  proc- 
ess at  the  beginning  of  the  period ;  for  the  cost  of  leather  turned 
over  to  the  cutting  department  as  shown  by  the  summary  of 
requisitions  (credit  C-l)  ;  for  direct  labor  as  shown  by  the 
voucher  register  and  the  journal  entries  bringing  on  accrued 
wages;  for  departmental  expenses  as  shown  by  the  footing  of 
the  special  column  in  the  voucher  register;  for  tools  and  sup- 
plies used  (credit  A-7)  ;  and  for  indirect  labor. 


238      SYMTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

The  overhead  expenses  apportioned  to  this  account  are  deter- 
mined as  follows: 

Insurance  on  merchandise  in  the  cutting  department  is  based 
on  the  average  inventory. 

Depreciation  of  machinery  and  equipment  is  based  on  an  esti- 
mated life  of  twelve  years. 

It  is  charged  each  month  with  one-half  of  the  expired  liability 
insurance  (the  balance  is  charged  to  account  M-10). 

Three-eighths  of  the  monthly  bill  for  lighting.  This  bill  is  dis- 
tributed through  the  voucher  register;  three-eighths  to  the  cut- 
ting department,  three-eighths  to  account  N-5,  and  one-fourth 
to  account  L-4. 

The  heat  is  supplied  by  an  outside  company.  The  bill  is 
received  monthly,  distributed  through  the  voucher  register,  and 
charged  three-eighths  to  account  J-l,  three-eighths  to  account 
N-6,  and  one-fourth  to  account  L-5. 

The  rent  each  month  is  figured  on  a  basis  of  $4,000  a  year, 
being  an  estimated  amount,  and  is  charged  to  account  J-l  and 
credited  to  account  S-3. 

Charge  this  account  at  the  end  of  each  month  for  taxes  on 
merchandise  and  equipment  based  on  the  value  of  merchandise 
and  equipment  in  the  department. 

Kepairs  to  equipment  in  the  cutting  department  are  charged 
direct  through  the  voucher  register. 

Credit  at  the  end  of  each  month  with  the  finished  product 
turned  over  to  the  sales  department  as  shown  by  the  summary 
of  form  26  (debit  account  C-2)  at  the  cost  of  the  finished 
product  as  determined  from  the  cutting  reports  plus  the  load- 
ing; for  the  work  in  process  at  the  end  of  the  period  as  shown 
by  the  physical  inventory  (debit  account  C-3). 

The  balance  represents  the  profit  or  loss  in  the  cutting  de- 
partment and  is  transferred  to  account  H-5.  At  the  close  of 
the  year  the  balance  of  H-5  represents  the  net  profit  or  loss 
from  the  cutting  department  operations  for  the  year  and  is 
transferred  to  account  H-4.  Careful  attention  should  be  given 
to  the  balance  of  account  H-5  before  closing,  for  if  there  should 
be  a  large  inventory  of  finished  stock  on  hand  unsold  an  antici- 
pation of  profits  would  result  unless  an  adjustment  is  made  for 
the  loading  added  to  the  cost  of  the  cut  stock  transferred  from 
account  J-l. 


GENERAL  LEDGER  ACCOUNTS  239 

Account  J-2  Sales. — Credit  for  the  total  sales  as  shown  by 
the  footing  of  the  corresponding  columns  in  the  sales  journal. 

Debit  for  the  sales  returns  as  shown  by  the  footing  of  the 
corresponding  column  in  the  sales  returns  book.  The  balance 
during  the  year  represents  the  net  sales  for  the  period.  At 
the  close  of  the  year  the  balance  of  account  J-3,  cost  of  sales, 
is  closed  into  account  J-2 ;  the  balance  then  represents  the  gross 
profit  on  sales  and  is  closed  into  profit  and  loss. 

GENERAL  AND  MANUFACTURING  EXPENSES 

The  group  of  accounts  shown  in  the  chart  as  "N"  accounts 
are  the  general  expenses  of  the  business  not  chargeable  directly 
to  selling,  office  or  administration. 

The  accounts  in  the  "0"  group  are  kept  in  the  subsidiary 
ledger,  the  controlling  account  for  which  is  J-l.  When  an  entry 
is  made  in  the  general  ledger  charging  account  J-l  for  material, 
labor  or  expense  an  entry  is  also  made  in  the  proper  "O" 
account. 

It  is  not  intended  that  refinements  of  cost  accounting  should 
be  considered  in  studying  the  system  of  the  Central  Leather 
Company  as  it  is  evident  that  many  of  the  accounts  are  very 
crude  in  their  operation.  The  reason  for  including  the  set  at 
this  time  is  to  illustrate  the  principle  of  distributing  purchases 
and  sales  in  the  original  records,  using  that  information  in  part 
for  posting  to  general  ledger  accounts  and  in  part  merely  for 
statistical  purposes. 


CHAPTER  XXIV 

INSTITUTIONAL  ACCOUNTING 

There  are  three  more  or  less  distinct  classes  of  accounting 
designed  to  care  for  the  different  classes  of  institutions,  known 
as  public,  semi-public  and  private.  The  accounts  themselves  do 
not  differ  very  materially  from,  those  found  in  a  trading  con- 
cern except  that  the  assets  are  usually  represented  by  funds 
in  the  hands  of  committees  or  trustees,  or  invested  in  securities, 
while  the  capital  is  composed  of  the  funds  themselves. 

The  public  institutions  are  usually  supported  by  the  munici- 
pality and  are  conducted  by  a  board  of  trustees. 

The  semi-public  institution  is  one  which  is  supported  par- 
tially by  private  donations  and  partially  by  paying  occupants. 

A  private  institution  is  one  which  is  supported  entirely  by 
private  endowment  or  donations. 

Institutional  accounting  is  more  or  less  technical  in  its  char- 
acter, and  the  fundamental  principles  underlying  any  system 
of  accounts  for  an  institution  contemplate  the  segregation  of 
income  from  principal.  Throughout  all  of  the  transactions  a 
distinction  must  be  made  between  income  which  operates  to 
increase  principal,  and  income  which  may  be  used  for  operating 
purposes.  In  a  general  way  this  may  be  stated  as  governed 
by  the  same  laws  and  rules  under  which  an  executor  or  admin- 
istrator operates  in  making  his  accounting  to  the  courts. 

The  subject  of  institutional  accounting  is  most  interesting, 
but  on  account  of  its  rather  technical  nature  is  not  generally 
understood.  One  of  the  reasons  for  this  fact  may  be  that  a 
large  majority  of  the  institutions  are  for  charitable  purposes 
and  the  amount  of  money  which  they  have  available  to  expend 
for  accounting  or  system  work  is  very  limited,  which  results  in 
only  a  small  number  of  accountants  being  employed  or  having 
a  knowledge  of  the  work. 

In  any  institutional  system  it  is  generally  necessary  to  oper- 
ate a  set  of  controlling  accounts  as  the  treasurer  is  usually  a 
man  with  private  interests  who  devotes  only  a  small  portion  of 

240 


INSTITUTIONAL  ACCOUNTING  241 

his  time  to  the  institution.  These  controlling  accounts  are  kept 
in  the  treasurer's  or  controlling  ledger,  which  is  written  up 
once  or  twice  each  year. 

The  operations  of  the  institution  controlled  by  the  treasurer's 
ledger  are  recorded  in  a  subsidiary  ledger,  called  superintend- 
ent's, foreman's,  or  matron's  ledger,  depending  upon  the  title 
given  to  the  active  head  of  the  institution. 

All  of  the  transactions  relating  to  investments,  funds,  etc., 
are  recorded  in  the  treasurer's  ledger  and  he  disburses  to  the 
superintendent  or  head  of  the  institution  varying  amounts  at 
different  times  to  meet  current  expenses,  the  method  of  making 
such  disbursements  depending  upon  the  system  used  in  the  par- 
ticular institution. 

The  treasurer's  ledger  has  a  control  account  for  the  super- 
intendent and  likewise  the  superintendent  has  a  control  account 
in  his  ledger  showing  his  transactions  with  the  treasurer. 

At  the  close  of  the  year  the  superintendent's  ledger  is  closed 
and  the  transactions  transferred  in  total  to  the  treasurer's 
ledger  where  operating  accounts  are  maintained  in  the  same 
form. 

While  the  general  principles  underlying  institutional  account- 
ing are  the  same  for  each  class,  probably  the  semi-public  insti- 
tution presents  the  more  complicated  problem,  and  in  order 
that  we  may  have  a  clear  understanding  of  the  various  opera- 
tions a  set  of  accounts  designed  for  this  class  of  institution 
has  been  selected  for  detailed  study. 


CHAPTER  XXV 

BAY  STATE  HOSPITAL 
GENERAL  PLAN 

The  Bay  State  Hospital  is  a  semi-public  institution  supported 
by  contributions,  the  income  from  certain  endowment  funds 
which  are  either  restricted,  that  is,  used  for  specific  purposes, 
or  general,  and  from  amounts  paid  for  services.  The  income 
from  general  funds  is  applied  to  the  current  operating  expenses 
so  far  as  is  necessary,  the  balance  being  credited  to  the  surplus 
account  as  a  reserve  against  future  periods. 

The  treasurer,  who  is  elected  by  the  trustees,  devotes  very 
little  time  to  the  institution  and  at  the  close  of  each  year  em- 
ploys some  one  to  review  the  transactions  of  the  superintendent, 
make  the  necessary  adjusting  and  closing  entries,  bring  the  re- 
sult of  the  operations  into  his  ledger,  and  prepare  the  state- 
ments and  reports. 

The  hospital  itself  is  in  charge  of  a  superintendent  who  op- 
erates a  ledger  provided  with  detailed  expense  accounts.  At 
the  close  of  each  year  the  expense  accounts  are  distributed  to 
the  different  departments  or  wards  which  produce  income.  A 
more  or  less  elaborate  set  of  operating  statements  is  prepared 
by  the  superintendent  under  the  direction  of  the  accountant 
employed  by  the  treasurer.  These  statements  form  the  basis  of 
the  treasurer's  annual  report,  which  is  explained  in  Chapter 
XXXII. 

All  of  the  transactions  by  the  superintendent  are  controlled  by 
the  treasurer,  and  the  disbursements  by  both  the  treasurer  and 
the  superintendent  are  approved  by  the  board  of  trustees. 

The  superintendent  incurs  various  expenses  during  the  month 
and  at  the  close  of  the  month  forwards  the  bills  to  the  board  of 
trustees.  The  bills  are  reviewed  by  the  trustees  and  passed  to 
the  treasurer,  who  draws  a  check  to  the  order  of  the  superin- 
tendent in  settlement,  charging  superintendent's  account  in  his 
ledger  and  crediting  cash.  The  superintendent  receives  the 
check,  credits  the  treasurer's  account  in  his  ledger  and  charges 

242 


BAY  STATE  HOSPITAL  243 

the  various  operating  accounts  for  the  disbursements  which  he 
has  made. 

At  the  close  of  any  period  the  balance  of  the  two  controlling 
accounts  should  be  in  agreement,  the  treasurer  having  in  his 
ledger  in  total  the  transactions  which  are  detailed  in  the  super- 
intendent's ledger. 


CHAPTER  XXVI 

FORMS  AND  RECORDS 

The  complete  list  of  forms  used  in  the  system  of  the  Bay 
State  Hospital  is  shown  on  page  249,  but  as  most  of  the  forms 


CASHIER 
HER 

AS  FOLLOW 

BAY  STATE  HOSPITAL 
OUT-PAT1EKT  DEPARTMEUT 
DAILY  CASH  STATEMENT 

"WITH    FIMD    OSH  #           ___               BF.PRESFNTIHCi  THF  Dlfff 

RECEIPTS 

•I 

HO 

DEPARTMEUT 

AT10UMT 

GENERAL   SURGICAL  4                           DRESSINGS   4 

GEHCIAL  MEDICAL 

etc  AMI  CAR 

THROAT  Ann  MOSt 

HUM 

GYNECOLOGICAL 

BRTHOPEDIC 

HEHR9LOGICAL 

X-RAY 

«KKMM 

KltTU. 

HEDICAL  SUPPLIES 

TOTAL 

CORRECT    AMD    ENTERED 

NCRSE  in 

CASHIER 

Form  9 

have  already  been  considered  in  previous  systems  only  those 
peculiar  to  the  institution  will  be  described  in  detail. 

Form  9     Outpatient   Department — Daily  Cash  Statement. 

244 


FORMS  AND  RECORDS 


245 


— This  form  is  made  out  in  duplicate  by  the  nurse  in  charge 
of  the  outpatient  department,  and  is  sent  to  the  cashier  at  the 
close  of  each  day.  As  the  outpatient  department  is  divided  into 


BAY   STATE  HOSPITAL 

NUMBER             NAME                                                                                                           FILE  BEHIND 

WARD                   ADDRES5 

BILL  TO                                                                             ADDRESS 

ADMITTED 

DISCHARGED 

HATE 

RATE  CHANGED 

IM    HOSPITAL. 

w  n 

CHARGES 

CREDITS 

DATE 

ITEMS 

W 

I) 

RATE 

AMOUNT 

DATE 

ITEMS 

AMOUNT 

DATE 

ITEMS    AMOUNT 

•^ 

1 



__u 

Form  11 

two-  sections,  one  in  the  hospital  and  one  as  a  dispensary,  two 
sheets  are  used' for  each  day's  business. 

The  nurse  in  charge  of  the  department  enters  the  number 
of  patients,' classifying  the  treatment  received,  and  showing  the 
amount  of  cash  paid  by  the  patient. 

The  original  report  is  sent  to  the  cashier  with  the  cash  and 
forms  the  basis  for  the  cash  book  entry,  crediting  the  proper 


BAY  STATE  HOSPITAL 


PATIENT'S 
CHARGE  NO 


X-RAY 

DATE 


PLEASE  CHARGE 


Form  13 

income  account  (19)  and  charging  cash,  account  1.  See  chart 
of  accounts,  page  250. 

Form  1 1  Patient's  Charge  Card. — This  is  a  4x6  card  kept  in 
the  hospital  office  and  shows  a  complete  record  of  the  time  the 
patient  is  in  the  haspital  with  the  rate  charged,  and  the  total 
amount  to  be  entered  in  form  18,  patient's  charge  book. 

Form  13     X-Ray — Charge  Card — Is  used  in  all  departments, 


246      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

a  different  color  being  provided  for  each,  and  shows  the  charge 
against  the  patient  for  x-ray  services  regardless  of  the  ward  in 
which  he  may  be  located.  This  form  is  one  of  the  original 
records  used  in  making  entries  in  the  patient's  charge  book. 


no. 

BAY    STATE  HOSPITAL 
PATIEttT   CARD    -    GENERAL    INFORMATION 


WARD       .^ _^__— _ - 

AGK  CIVIL   COtinlTIOH 

BIRTHFtACE  i 

OCCUPATION         _^_________^^_ 

RESIDENCE  ' 

rnon  DR     


DIAGNOSIS  on  ADMission 

RELATIVE  


ADDRESS  OF  RELATION 
WHAT  RELATION         _ 


DIAGNOSIS  On  DISCHARGE 
COnDITIOn  on  DISCHARGE 
DATE  OF  DISCHARGE  


Form  20 

Form  20  Patient  Card — General  Information. — This  form 
is  used  as  a  record  of  information  from  all  patients  entering 
the  hospital. 

The  cards  are  kept  in  an  alphabetical  file  in  the  main  office 
and  show  detailed  information  regarding  each  patient. 

Form  24  Storeroom  Requisition — Surgical  Supplies. — This 
requisition  is  used  when  supplies  are  to  be  withdrawn  from  the 
storeroom.  A  form  is  prepared  for  each  department  along  the 
same  lines  as  the  ordinary  stores  requisition.  It  is  made  out 
by  the  head  of  the  department  requiring  supplies  and  is  filed 
in  the  storeroom. 


FORMS  AND  RECORDS 


247 


The  requisitions  are  summarized  and  form  the  basis  of  a 
charge  to  the  different  departments  for  supplies  used. 

Form  28  Head  Nurse's  Daily  Report. — This  form  is  used 
by  the  head  nurse  for  preparing  the  report  of  patients  in  the 
hospital  each  day  and  the  number  of  nurses.  The  name  and 
case  number  of  each  patient  admitted  or  discharged  is  entered 
in  the  proper  space.  The  number  of  patients  the  previous  day 


For 

DEn 

Urt 

•n  MO  24 

BAY  STATE  HOSPITAL 
SURGICAL  SUPPLIES 
19 

STORE  ROOM 

ISSUED  TO 

T                                                               .         APPT 

IOVED 

^> 

•^^ 

^ 

">v>—  -^_                           —  •"'""""'                                  ~^*~ 

-^ 

Form  24 

is  entered  at  the  head  of  the  report,  and  to  this  number  is  added 
the  number  admitted.  The  number  discharged  during  the  day 
is  deducted,  thus  arriving  at  the  number  to  be  carried  forward 
to  the  next  day.  The  number  of  patients  in  the  hospital  during 
the  day  is  used  to  ascertain  the  patient  days  in  each  ward,  a 
daily  report  being  made  for  each  ward. 

The  same  method  of  preparing  the  report  with  respect  to  the 
nurses  is  followed,  the  total  hours  worked  being  divided  by  the 
number  of  hours  considered  to  constitute  a  day  determines  the 
number  of  nurse  days  in  each  ward.  The  patient  days  and 
nurse  days  thus  determined  are  used  as  the  basis  for  distribut- 
ing the  general  expenses  to  the  different  wards,  and  while  the 
report  is  more  or  less  statistical,  much  use  is  made  of  it  in 
studying  the  result  of  operations.  Care  is  necessary  in  its 
preparation,  as  the  operations  of  the  different  wards  are  seri- 
ously affected  by  errors. 


248      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


FORMS  AND  RECORDS  249 


LIST  OF  FORMS— SUPERINTENDENT'S  OFFICE 

PURCHASE  RECORDS  FORM  No. 

Purchase  Requisition  1 

Purchase  Order  2 

Goods  Received  Sheet  3 

Voucher  Jacket  4 

Voucher  Register  5 

CASH  RECEIPTS  AND  PAYMENTS 

Cash  Receipts  6 

Cash  Payments  7 

Petty  Cash  Voucher  8 

Outpatient  Department — Daily  Cash  Statement  9 

CHABGE  RECORDS 

Weekly  Bill  10 

Patient's  Charge  Card  11 

Operations  Charge  Card  12 

X-Ray — Charge  Card  13 

Pathological  Laboratory  Charge  Card  14 

Apothecary  Charge  Card  15 

Telephone  Charge  Card                                                        .  16 

Special  Nursing  Charge  Card  17 

Patients'  Charge  Book  18 

Patients'  Charge  Trial  Balance  19 

GENERAL  ACCOUNTING  RECORDS 

Patient  Card — General  Information  20 

Storeroom  Requisition — Kitchen  Supplies  21 

— Stationery  and  Printing  22 

— Medical  Supplies  23 

— Surgical  Supplies  24 

— Appliances  and  Instruments  25 

— Housekeeping  Supplies  26 

Apothecary  Requisition  27 

Head  Nurse's  Daily  Report  28 

Daily  Ambulance  Record  29 

General  Journal  30 

Superintendent's  Ledger  31 

Superintendent's  Ledger  Trial  Balance  32 


CHAPTER  XXVII 

BAY  STATE  HOSPITAL 
TREASURER'S  LEDGER 
LIST  OF  ACCOUNTS 

1  Treasurer's  Account  with  Superintendent 

2  General  Cash 

3  Special  Endowment  Funds 

4  Endowed  Bed  Fund 

5  Hospital  Earnings 

6  Contributions 

7  Income  from  Investments 

8  Income  from  Special  Endowment  Funds 

9  Income  from  Endowed  Bed  Fund 

10  Sites  and  Grounds 

11  •      Buildings 

12  Furniture  and  Fixtures 

13  Machinery  and  Tools 

14  Apparatus  and  Instruments 

15  Ambulances,  Horses  and  Equipment 

16  Mortgages  Receivable 

17  Securities  Owned 

18  Treasurer's  Accounts  Receivable 

19  Interest  Accrued 

20  Hospital  Expenses 

21  Capital    (Hospital  Properties  and  Equipment) 

22  Special  Endowments 

23  Endowed  Bed  Fund  Account 

24  Surplus  and  Deficit 

The  functions  of  the  accounte  peculiar  to  this  system  are  as 
follows : 

Account  i  Treasurer's  Account  with  Superintendent.— 
Debit  with  cash  paid  to  the  superintendent  (credit  account  2)  ; 
at  the  end  of  the  year  for  the  hospital  receipts  as  shown  by  the 
annual  report  (credit  account  5). 

Credit  with  cash  received  from  the  superintendent  (debit  ac- 
count 2) ;  for  uncollected  accounts  receivable  at  the  close  of  the 
year  (debit  account  24)  ;  for  the  total  expenses  during  the  year 
as  shown  by  the  annual  report  (debit  account  20). 

If  the  balance  of  this  account  is  a  debit  it  represents  the 
amount  due  the  treasurer  from  the  superintendent.  If  a  credit, 
the  amount  is  due  from  the  treasurer  to  the  superintendent  in 
order  to  make  up  the  operating  deficit  in  the  superintendent's 
accounts. 

250 


BAY  STATE  HOSPITAL  251 

Account  2  General  Cash. — Debit  for  cash  received  from  con- 
tributions (credit  account  6)  ;  for  income  from  endowment 
funds  (credit  account  8  or  9)  ;  for  cash  received  from  the  super- 
intendent (credit  account  1)  ;  for  all  other  miscellaneous  cash 
receipts. 

Credit  for  investments  made  (debit  account  16  or  17)  ;  for 
purchases  of  permanent  equipment  (debit  account  12,  13,  14 
or  15)  ;  for  cash  paid  to  the  superintendent  (debit  account  1) ; 
and  for  all  miscellaneous  cash  payments. 

The  balance  represents  the  cash  on  hand  in  the  general  fund. 

Account  3  Special  Endowment  Funds. — Debit  when  amounts 
are  received  the  principal  or  income  from  which  is  to  be  set 
aside  for  special  purposes  (credit  account  22).  The  entries  in 
this  account  are  not  ordinarily  put  through  the  cash  book  for 
the  reason  that  the  special  endowments  are  rarely  received  in 
cash. 

The  balance  of  this  account  is  an  asset  and  should  equal  the 
credit  balance  of  account  22. 

Account  4  Endowed  Bed  Fund. — This  account  is  a  special 
endowment  fund  operated  the  same  as  account  3. 

It  is  charged  with  cash  or  property  the  income  from  which  is 
donated  to  maintain  certain  beds.  It  has  been  found  necessary 
to  make  this  separation  of  special  endowments  in  order  to  have 
a  proper  accounting  of  the  amounts  donated  for  this  purpose. 
The  offsetting  credit  is  to  account  23. 

Account  5  Hospital  Earnings. — This  account  is  used  only 
at  the  end  of  the  year. 

Debit  for  hospital  expenses  during  the  year  (credit  ac- 
count20). 

Credit  for  the  total  hospital  receipts  of  the  year  as  shown  by 
the  annual  report  (debit  account  5). 

The  balance  is  the  surplus  or  deficit  for  the  year,  and  is 
transferred  to  account  24. 

Account  6  Contributions. — Credit  for  contributions  when 
they  are  received  (debit  account  2  if  cash  or  account  17  if 
securities). 

The  balance  before  the  books  are  closed  represents  the  total 
receipts  from  contributions  during  the  year,  and  is  transferred 
to  account  24. 


252       SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

The  contributions  are  usually  applicable  to  the  current  ex- 
penses and  for  this  reason  are  handled  as  above. 

Account  7  Income  from  Investments. — Credit  this  account 
with  the  income  from  mortgages,  securities  and  real  estate  (debit 
account  2). 

Debit  for  accrued  income  acquired  if  any  at  the  time  securi- 
ties are  purchased. 

The  balance  of  the  account  represents  income  from  invest- 
ments and  at  the  close  of  the  year  is  transferred  to  account  24. 

Account  8  Income  from  Special  Endowment  Funds. — 
Credit  for  income  received  from  the  special  endowment  funds 
(debit  account  2). 

Debit  for  accrued  income  acquired,  if  any,  at  the  time  securi- 
ties are  purchased. 

The  balance  at  the  close  of  the  year  represents  the  amount 
of  income  earned  from  the  special  endowment  investments  and 
is  closed  into  account  24. 

Account  9  Income  from  Endowed  Bed  Fund. — Credit  for 
income  received  from  the  endowed  bed  fund  investments  (debit 
account  2). 

Debit  for  accrued  income  acquired,  if  any,  at  the  time  se- 
curities are  purchased. 

The  balance  represents  the  amount  of  income  earned  from 
the  endowed  bed  fund  investments  and  is  closed  into  account  24. 

Account  10  Sites  and  Grounds. — Debit  for  the  cost  of  land 
purchased  and  for  the  appraised  value  of  land  donated  without 
restrictions.  This  is  a  fixed  asset  account  and  represents  lands 
owned  by  the  hospital. 

Account  ii  Buildings. — Debit  for  the  cost  of  buildings  pur- 
chased or  erected  (credit  account  2),  or  for  the  appraised  value 
of  buildings  donated  (credit  account  21). 

Credit  at  the  end  of  the  year  for  the  estimated  amount  of 
depreciation  (debit  account  24). 

The  balance  is  an  asset  and  represents  the  present  value  of 
buildings  owned. 

Account  12  Furniture  and  Fixtures. — Debit  for  the  cost  of 
general  office  furniture  and  equipment,  and  for  equipment  in 
the  wards  (credit  account  2  for  items  purchased  and  account  21 
for  items  donated). 


BAY  STATE  HOSPITAL  253 

Credit  for  the  estimated  amount  of  depreciation  during  the 
year  (debit  account  24). 

The  balance  is  an  asset  representing  the  present  value  of  the 
furniture  and  fixtures  on  hand. 

Account  13  Machinery  and  Tools. — Debit  for  the  cost  of 
machinery  and  tools  in  the  heat,  light  and  power  plant,  also  for 
the  permanent  equipment  in  the  kitchen  (credit  account  2  if 
bought  for  cash,  and  account  21  if  donated). 

Credit  for  the  estimated  amount  of  depreciation  during  the 
year  (debit  account  24). 

The  balance  represents  the  present  value  of  the  machinery 
and  tools  on  hand. 

Account  14  Apparatus  and  Instruments. — Debit  for  the 
value  of  permanent  (3  years)  apparatus  (credit  account  2  if 
purchased  for  cash  or  account  21  if  donated). 

Credit  at  the  end  of  the  year  for  the  estimated  amount  of 
depreciation  (debit  account  24). 

The  balance  represents  the  present  value  of  permanent  ap- 
paratus and  instruments  on  hand. 

Account  15  Ambulances,  Horses  and  Equipment. — Debit 
for  the  cost  or  value  of  the  ambulances,  horses  and  equipment 
(credit  account  2  or  account  19). 

Credit  at  the  end  of  the  year  for  the  estimated  amount  of 
depreciation  (debit  account  24). 

The  balance  represents  the  present  value  of  ambulances, 
horses  and  equipment  on  hand. 

Account  1 6  Mortgages  Receivable. — Debit  for  the  cost  of 
mortgages  purchased  (credit  account  2). 

Credit  for  cost  of  mortgages  sold.  (Profit  OF  loss  from  sale 
of  mortgages  is  debited  or  credited  direct  to  account  24). 

The  balance  represents  the  cost  of  mortgages  owned  by  the 
institution. 

Account  17  Securities  Owned. — This  account  represents  the 
cost  of  securities  held  by  the  trustees  and  is  operated  in  the 
same  way  as  account  16. 

Account  1 8  Treasurer's  Accounts  Receivable. — This  ac- 
count is  not  used  extensively.  It  represents  amounts  due  to 
the  treasurer  possibly  on  account  of  the  sale  of  securities,  mort- 
gages, etc.  It  does  not  include  the  amounts  due  from  patients. 

Account  19     Interest  Accrued. — This  account  is  used  at  the 


254      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

end  of  the  year  to  bring  on  the  interest  accrued  on  investments 
at  that  time.  At  the  beginning  of  the  new  period  a  reversing 
entry  is  made  eliminating  the  balance  brought  forward. 

Account  20  Hospital  Expenses. — Debit  for  the  total  ex- 
penses during  the  year  as  shown  by  the  superintendent's  annual 
report  (credit  account  1). 

The  balance  of  this  account  represents  the  expenses  at  the 
hospital  during  the  year  and  is  closed  to  account  5. 

Account  21  Capital  (Hospital  Properties  and  Equipment). 
Credit  for  the  estimated  or  appraised  value  of  property  or  items 
of  permanent  equipment  donated  (debit  account  10,  11,  12,  13, 
14  or  15). 

The  balance  represents  that  part  of  the  permanent  capital 
and  equipment  which  has  been  donated. 

Account  22  Special  Endowments. — Credit  for  special  en- 
dowments received  (debit  account  2  or  3).  If  the  endowment 
is  received  in  cash  it  is  necessary  to  debit  account  2.  The  cash 
would  in  all  probability  be  invested  in  securities  which  would 
be  turned  over  to  the  trustees,  charging  account  3.  In  any 
event  the  transfer  of  the  endowment  in  the  form  in  which  re- 
ceived or  in  some  other  form  to  the  trustees  must  be  made  so  as 
to  transfer  the  amount  through  account  2  to  account  3,  thus 
equalizing  the  balances  of  accounts  22  and  3. 

Account  23  Endowed  Bed  Fund. — Credit  for  cash  or  prop- 
erty donated  to  maintain  certain  beds. 

Account  23  is  maintained  as  endowments  are  received  for  the 
maintenance  of  certain  beds  and  it  has  been  found  necessary 
to  keep  these  funds  entirely  apart.  If  under  the  terms  of  the 
gift  the  income  may  at  any  future  period  be  used  as  the  trustees 
consider  advisable  the  amount  is  transferred  from  account  23 
to  account  22  and  the  fund  from  account  4  to  account  3. 

Account  24  Surplus  and  Deficit. — Debit  at  the  end  of  the 
year  for  the  operating  deficit  as  shown  by  the  annual  report 
(credit  account  5)  ;  for  the  annual  depreciation  charged  off 
(credit  account  11,  12,  13,  14  or  15). 

Credit  for  contributions  received  (debit  account  6)  ;  for  in- 
come received  from  investments  (debit  accounts  7,  8  and  9)  ; 
for  the  net  profit  from  operations  for  the  year  as  shown  by  the 
annual  report. 

The  balance  represents  the  accrued  surplus  or  deficit  to  date. 


BAY  STATE  HOSPITAL  255 


BAY  STATE  HOSPITAL 
LIST  OF  LEDGER   ACCOUNTS 
SUPERINTENDENT'S  LEDGER 

0  Superintendent's  Account  with  Treasurer 

ASSETS 

1  Superintendent's  Cash 

2  Petty  Cash  Fund 

3  Accounts  Due  from  Patients 

INVENTORIES 

4  Medical   Supplies 

5  Surgical  Supplies 

6  Appliances  and  Instruments 

7  Crockery  and  Kitchen   Supplies 

8  Housekeeping  Supplies 

9  Printing  and  Stationery 

10  Coal 

11  Food  Supplies 

PREPAID  ITEMS 

12  Insurance  Unexpired 

LIABILITIES 

13  Vouchers  Payable 

14  Sundry  Accrued  Liabilities 

RECEIPTS 

15  Board  of  Private  Room  Patients 

16  Board  of  Ward  Pay  Patients 

17  Board  of  Friends  or  Parents 

18  Special  Nursing 

19  Outpatient  Department 

20  Operations 

21  X-Ray 

22  Miscellaneous 

EXPENSES 

ADMINISTRATION 

23  Salaries — Officers  and  Clerks 

24  Stationery,  Printing  and  Postage 

25  Telephone  and  Telegrams 

PROFESSIONAL  CARE  OF  PATIENTS 

Salaries  and  Wages 

26  Supt.  of  Nurses,  Assistants  and  Instructors 

27  Nurses 

28  Orderlies 

Medical  Supplies 

29  Drugs 

30  Alcohol,  Wines  and  Liquors 

31  Rubber  Goods 

32  Miscellaneous 


256      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Surgical  Supplies 

33  Gauze 

34  Bandages 

35  X-Ray  Supplies 

36  Apparatus  and  Instruments 

37  Absorbent  Cotton 

38  Ether 

39  Rubber  Goods 

Outpatient  Department 

40  Salaries  and  Wages 

DEPARTMENT  EXPENSE 

Pathological  Laboratory 

41  Salaries  and  Wages 

42  Supplies 

Apothecary  Department 

43  Salaries  and  Wages 

Nurjcs'  Home 

44  Salaries  and  Wages 

Housekeeping 

45  Salaries  and  Wages 

46  Dry  Goods 

47  Soap 

48  General  Supplies 

Kitchen  and  Dining  Room 

49  Salaries  and  Wages 

50  Supplies 

Laundry 

51  Salaries  and  Wages 

52  Supplies 

Food 

53  Butter 

54  Cereal,  Rice,  Meals,  etc. 

55  Coffee,  Tea,  Cocoa  and  Chocolate 

56  Eggs 

57  Fish 

58  Flour 

59  Fruit 

60  Meat 

61  Milk 

62  Potatoes 

63  Poultry 

64  Sugar 

65  Vegetables 

66  Sundries 

GENERAL  HOUSE  AND  PROPERTY  EXPENSE 

Heat,  Light  and  Power  Plant 

67  Salaries  and  Wages 

68  Coal 

69  Electrical  Supplies 

70  Repairs  and  Renewals 

71  Oils,  Waste,  etc. 


BAY  STATE  HOSPITAL  257 


Repairs  to  Buildings 

72  Salaries  and  Wages 

73  Supplies 

Care  of  Buildings  and  Grounds 

74  Salaries  and  Wages 

75  Supplies 

76  Gas 

77  Water 

78  Insurance 

79  Conveyances 

80  General  Expense 

81  Cost  of  Nurses 

EXPENSES  BY  UNITS 

82  Medical  Wards 

83  Surgical   Wards 

84  Maternity  Wards 

85  Private  Patient  Wards 

86  Outpatient  Department 


CHAPTER  XXVIII 
SUPERINTENDENT'S  LEDGER 

ASSETS  AND  LIABILITIES 

The  first  account  in  the  superintendent's  ledger  is  with  the 
treasurer  and  inasmuch  as  this  is  only  a  controlling  account  the 
number  "0"  is  assigned  to  it. 

Debit  for  cash  paid  by  the  superintendent  to  the  treasurer 
(credit  account  1)  ;  at  the  end  of  the  year  for  the  total  expenses 
during  the  year  (credit  accounts  81  to  86  inclusive)  ;  for  uncol- 
lected  accounts  due  from  patients  (credit  account  3). 

Credit  for  cash  received  from  the  treasurer  (debit  account  1)  ; 
at  the  end  of  the  year  for  the  total  receipts  from  operations 
(debit  accounts  15  to  22  inclusive). 

The  balance  of  this  account,  either  debit  or  credit,  should 
agree  with  the  controlling  account  in  the  treasurer's  ledger. 

Account  i  Superintendent's  Cash. — Debit  for  cash  received 
from  the  treasurer  (credit  account  0)  ;  for  cash  received  from 
patients  on  account  of  services  rendered  (credit  account  3)  ; 
for  cash  received  from  sundry  sales  (credit  account  19). 

Credit  for  cash  paid  to  the  treasurer  (debit  account  0)  ;  for 
cash  paid  on  account  of  current  vouchers  (debit  account  13). 

The  balance  represents  cash  on  hand  in  the  superintendent's 
fund. 

Account  2  Petty  Cash  Fund. — Debit  for  the  total  amount 
of  the  fund  when  established,  the  imprest  cash  system  being 
used  (credit  account  1). 

The  balance  represents  the  amount  of  the  petty  cash  fund. 

Account  3  Accounts  Due  from  Patients. — Debit  at  the  end 
of  the  month  for  the  total  charges  to  patients  as  shown  by  the 
patients  charge  book  (credit  accounts  15  to  22). 

Credit  for  cash  received  in  payment  of  charges  against  pa- 
tients (debit  account  1).  For  bad  accounts  charged  off  (debit 
account  0). 

The  balance  represents  amounts  due  from  patients  on  account 
of  services  rendered. 

258 


SUPERINTENDENT'S  LEDGER  259 

Accounts  4  to  ii  Inventories. — The  inventory  accounts  are 
brought  on  at  the  end  of  the  year  when  a  physical  inventory  is 
taken.  Accounts  4  to  11  are  charged  for  the  amount  of  the 
physical  inventory  in  each  department,  the  corresponding  op- 
erating accounts  being  credited. 

Account  12  Insurance  Unexpired. — This  account  is  brought 
on  only  at  the  end  of  the  year  and  is  charged  for  the  amount 
of  insurance  premiums  unexpired  at  that  time  (credit  ac- 
count 78). 

Account  13  Vouchers  Payable. — Debit  through  the  cash 
book  for  the  amount  of  checks  issued  in  payment  of  vouchers 
payable  (credit  account  1). 

Credit  for  the  total  expenditures  for  the  month  as  shown  by 
the  voucher  register. 

The  balance  represents  vouchers  payable  outstanding. 

Account  14  Sundry  Accrued  Liabilities. — This  is  an  ordi- 
nary account  and  is  used  only  at  the  end  of  the  year  for  the 
purpose  of  bringing  into  account  the  accrued  wages,  salaries, 
etc. 

STATEMENTS 

In  preparing  the  statement  of  assets  and  liabilities  shown  on 
page  286  the  balances  shown  in  the  treasurer's  ledger  are  used 
in  connection  with  the  balances  shown  in  the  superintendent's 
ledger,  or  in  other  words,  the  treasurer's  account  with  the  super- 
intendent is  analyzed  into  its  component  parts  in  order  to  pre- 
pare a  detailed  balance  sheet. 

The  capital  assets  are  taken  from  the  treasurer's  ledger  ac- 
counts 10  to  15.  Under  the  group  called  "Investments"  the 
treasurer's  ledger  accounts  16  and  17  are  taken  for  the  general 
fund  investments,  and  accounts  3  and  4  are  analyzed  for  the 
special  endowment  funds.  Under  the  current  assets,  cash  in 
hands  of  treasurer  is  the  balance  of  account  2  in  the  treasurer's 
ledger ;  cash  in  hands  of  superintendent,  the  balance  of  account  1 
in  the  superintendent's  ledger;  petty  cash  fund  the  balance  of 
account  2  in  the  superintendent's  ledger;  accounts  due  from 
patients,  the  balance  of  account  3  in  the  superintendent's  ledger; 
sundry  accounts  receivable  the  balance  of  account  16  in  the 
treasurer's  ledger;  general  material  on  hand  the  sum  of  the 
balances  of  accounts  4  to  11  in  the  superintendent's  ledger; 


200      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

accrued  interest  on  investments  the  balance  of  account  19  in 
the  treasurer's  ledger;  unexpired  insurance  the  balance  of  ac- 
count 12  in  the  superintendent's  ledger. 

Under  the  liabilities  all  accounts  under  capital  liabilities  are 
taken  from  the  treasurer's  ledger.  Under  the  current  liabilities, 
vouchers  payable  is  the  balance  of  account  13  in  the  superin- 
tendent's ledger,  and  sundry  accrued  liabilities  the  balance  of 
account  14  in  the  superintendent's  ledger.  The  surplus  or 
deficit  accoun^  is  the  balance  of  account  24  in  the  treasurer's 
ledger,  and  represents  the  accumulated  surplus  or  deficit  to 
date. 


CHAPTER  XXIX 
OPERATING  ACCOUNTS 

Accounts  15  to  22  Revenue. — Accounts  15  to  22  are  all  reve- 
nue accounts  showing  the  distribution  of  income  to  the  depart- 
ment or  ward  where  earned. 

These  accounts  are  credited  at  the  end  of  the  month  with  the 
footing  of  the  corresponding  column  in  the  patient 's  charge  book, 
form  18,  and  if  there  have  been  cash  sales,  for  the  amount  of 
such  sales  as  taken  from  the  cash  book. 

At  the  end  of  the  year  the  balances  in  these  accounts  should 
be  closed  into  the  controlling  account  for  the  department  or 
ward. 

The  expense  accounts  operated  in  the  system  follow  the  same 
general  plan  as  any  business  and  all  of  the  accounts  are  con- 
tained in  the  ledger.  The  main  groups,  without  numbers,  in 
the  following  chart  may  be  termed  controlling  accounts,  although 
this  designation  is  somewhat-  misleading.  The  plan  followed  is 
during  the  year  to  charge  the  expenses  to  the  different  accounts 
which  are  numbered  according  to  the  classification,  and  at  the 
end  of  the  year  before  final  distribution  is  made  to  close  the 
balances  of  the  numbered  accounts  back  into  the  main  accounts 
which  do  not  carry  numbers.  For  example,  during  the  year 
expenses  incident  to  administration  would  be  charged  to  accounts 
23,  24  and  25.  At  the  end  of  the  year  these  three  accounts 
would  be  closed  into  one  account  called  "Administration." 

It  will  be  noted  by  referring  to  the  chart  that  under  profes- 
sional care  of  patients  there  are  four  general  groups,  salaries 
and  wages,  including  accounts  26  to  28;  medical  supplies,  ac- 
counts 29  to  32;  surgical  supplies,  accounts  33  to  39,  and  out- 
patient department  account  40. 

At  the  end  of  the  year  the  numbered  accounts  are  first  closed 
back  to  their  main  accounts.  That  is,  accounts  26  to  28  are 
first  closed  to  salaries  and  wages,  then  after  distributions  have 
been  credited,  the  balances  are  closed  to  professional  care  of 
patients. 

261 


262      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

In  describing  the  functions  of  the  various  expense  accounts 
the  main  groupings  will  be  disregarded.  The  principle  on  which 
the  ledger  is  operated  should,  however,  be  kept  in  mind  espe- 
cially when  considering  the  adjusting  and  closing  entries. 

Account  23  Salaries — Officers  and  Clerks. — Debit  at  the 
close  of  each  month  for  the  salaries  of  the  general  administra- 
tive officers  and  clerks  which  include  the  superintendent,  his 
assistants,  and  the  accounting  department  salaries  as  shown  by 
the  voucher  register;  at  the  end  of  each  month  for  the  amount 
of  accrued  salaries,  the  offsetting  credit  being  to  account  14. 

The  balance  of  the  account  represents  the  salaries  and  wages 
paid  the  general  administrative  officers  and  at  the  end  of  the 
year  is  closed  into  administration. 

Account  24  Stationery,  Printing  and  Postage. — Debit  at 
the  end  of  each  month  with  the  total  amount  expended  for  sta- 
tionery, printing  and  postage  as  shown  by  the  corresponding 
column  in  the  voucher  register. 

Credit  at  the  end  of  the  year  with  the  supplies  on  hand  (debit 
account  9). 

The  balance  represents  the  expenses  incurred  for  stationery, 
printing  and  postage  and  is  closed  into  administration. 

Account  25  Telephone  and  Telegrams. — Debit  at  the  end 
of  each  month  for  the  total  expense  of  telephone  and  telegrams 
as  shown  by  the  corresponding  column  in  the  voucher  register 
and  also  for  the  salary  of  the  telephone  operator. 

The  balance  of  the  account  represents  the  expense  of  tele- 
phone and  telegrams  and  is  closed  into  administration. 

This  same  principle  is  followed  in  all  the  expense  accounts 
which  close  by  charging  at  the  end  of  the  period  into  the  main 
account  for  the  division. 

General  Account — Administration. — Debit  with  the  balances 
of  accounts  23,  24  and  25;  with  a  proportion  of  the  heat,  light 
and  power,  repairs  to  buildings,  care  of  buildings,  gas,  water 
and  insurance. 

The  balance  of  the  account  is  then  distributed  over  accounts 
81  to  86  inclusive. 

Accounts  26  to  28  Salaries  and  Wages. — Debit  from  the 
voucher  register  at  the  end  of  the  month  for  the  total  expense 
of  the  particular  class  for  the  month ;  at  the  end  of  the  year  for 
the  accrued  wages  (credit  account  14). 


OPERATING  ACCOUNTS  263 

At  the  end  of  the  year  the  balances  of  these  accounts  are 
closed  into  salaries  and  wages,  which  in  turn  is  closed  to  pro- 
fessional care  of  patients. 

Accounts  29  to  32  Medical  Supplies. — Debit  for  the  pur- 
chases of  medical  supplies  during  the  period  as  shown  by  the 
voucher  register. 

Credit  at  the  end  of  the  year  for  the  supplies  on  hand  as 
shown  by  physical  inventory  (debit  account  4). 

The  balances  of  accounts  29  to  32  are  closed  into  medical 
supplies,  which  in  turn  is  closed  into  professional  care  of 
patients. 

Accounts  33  to  39  Surgical  Supplies. — These  accounts  are 
in  the  same  class  and  are  handled  in  the  same  way  as  accounts 
29  to  32,  except  that  the  debit  for  supplies  on  hand  at  the  end 
of  the  year  is  to  accounts  5  and  6.  At  the  close  of  the  year 
the  balances  of  these  accounts  are  closed  into  surgical  supplies, 
which  in  turn  is  closed  into  professional  care  of  patients. 

Account  40  Outpatient  Department. — Debit  for  salaries 
and  wages  in  the  outpatient  department  and  the  dispensary. 

At  the  close  of  the  year  the  balance  of  the  account  is  closed 
to  the  outpatient  department  account,  which  in  turn  is  closed 
into  professional  care  of  patients. 

General  Account — Professional  Care  of  Patients — Is  charged 
with  the  balances  of  accounts  26  to  40  inclusive ;  with  a  pro- 
portion of  the  expense  of  housekeeping,  laundry,  heat,  light  and 
power,  repairs  to  buildings,  care  of  buildings,  gas,  water  and 
insurance,  in  the  same  way  that  the  general  administration 
account  is  charged,  and  the  balance  is  then  distributed  to  ac- 
counts 81*  to  86  inclusive. 

Accounts  41  and  42  Pathological  Laboratory. — Debit  from 
the  voucher  register  for  the  salaries  and  supplies  and  for  the 
accrued  wages. 

Credit  for  the  supplies  on  hand  at  the  end  of  the  year  as 
shown  by  the  physical  inventory  (debit  account  6). 

At  the  end  of  the  year  accounts  41  and  42  are  closed  to  the 
pathological  laboratory  account,  which,  after  being  charged  with 
a  proportion  of  the  general  overhead,  is  closed  into  the  depart- 
ment expense  account. 


264      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Account  43  Apothecary  Department — Salaries  and  Wages. 
— Debit  for  the  amount  of  salaries  and  wages  paid  in  the  de- 
partment. 

At  the  end  of  the  year  the  balance  of  account  43  is  closed  into 
apothecary  department,  which  is  then  charged  for  a  proportion 
of  the  general  overhead  and  closed  to  the  department  expense 
account. 

Account  44  Nurses'  Home — Salaries  and  Wages. — Debit 
for  the  salaries  and  wages  of  the  attendants  at  the  nurses'  home 
and  for  the  accrued  salaries  at  the  close  of  the  period. 

The  balance  of  the  account  is  closed  into  nurses'  home,  which 
in  turn  is  charged  direct  to  account  81. 

Accounts  45  to  48  Housekeeping. — Debit  from  the  voucher 
register  for  the  purchases  and  expenses  during  the  month. 

At  the  end  of  the  year  the  inventories  are  adjusted  through 
account  8  and  the  balances  closed  into  housekeeping,  which  is 
charged  with  a  proportion  of  the  kitchen  and  dining  room 
expense,  food,  laundry,  heat,  light  and  power,  repairs  to  build- 
ings, care  of  buildings,  gas,  water  and  insurance.  The  debit 
balance  of  housekeeping  is  then  distributed  in  accordance  with 
journal  entry  28. 

Accounts  49  and  50  Kitchen  and  Dining  Room. — Debit 
from  the  voucher  register  with  the  wages  and  expenses  during 
the  month  and  at  the  end  of  the  year  for  the  accrued  salaries 
and  wages. 

The  supplies  on  hand  are  adjusted  through  account  7  with  the 
physical  inventory  of  supplies  on  hand  and  the  accounts  are 
then  closed  into  kitchen  and  dining  room  account,  which  is 
charged  with  a  share  of  the  laundry,  heat,  light  and  power, 
repairs  to  buildings,  care  of  buildings,  gas,  water  and  insurance. 
The  balance  of  the  account  is  then  distributed  over  operating 
accounts  81  to  86  inclusive. 

Accounts  51  and  52  Laundry. — Debit  through  the  voucher 
register  for  the  salaries,  wages  and  the  supplies  purchased. 

At  the  end  of  the  year  it  is  adjusted  for  accrued  wages  and 
for  supplies  on  hand. 

The  balances  of  the  accounts  are  closed  into  the  laundry 
account,  which  is  charged  with  a  proportion  of  food,  heat,  light 
and  power,  repairs  to  buildings,  care  of  buildings,  gas,  water 
and  insurance. 


OPERATING  ACCOUNTS  265 

The  balance  of  the  account  is  then  distributed  in  accordance 
with  journal  entry  24. 

Accounts  53  to  66  Food. — Debit  through  the  voucher  reg- 
ister for  the  supplies  purchased. 

Credit  at  the  end  of  the  year  for  the  supplies  on  hand  (debit 
account  11). 

The  balances  are  then  closed  into  food  and  the  food  account 
distributed  over  the  operating  accounts  in  accordance  with 
journal  entry  22. 

Accounts  67  to  71  Heat,  Light  and  Power. — Debit  through 
the  voucher  register  for  the  salaries  and  wages  and  for  the 
supplies  used ;  at  the  end  of  the  year  for  the  accrued  salaries 
(credit  account  14). 

Credit  at  the  end  of  the  year  for  the  supplies  on  hand  (debit 
account  10). 

There  is  no  provision  for  laundry  supplies,  oil,  waste,  etc.,  in 
the  inventory  accounts.  These  items  are  considered  expenses 
when  purchased  and  are  not  inventoried. 

The  balances  of  accounts  67  to  71  are  closed  to  the  heat,  light 
and  power  account,  which  is  charged  with  a  proportion  of  the 
repairs  to  buildings,  care  of  buildings,  gas,  water  and  insurance. 
The  balance  is  distributed  to  the  various  operating  accounts  in 
accordance  with  journal  entry  18. 

Accounts  72  and  73  Repairs  to  Buildings. — Debit  through 
the  voucher  register  for  the  salaries,  wages  and  supplies. 

The  balances  are  then  closed  to  the  repairs  to  buildings  ac- 
count, which  is  distributed  in  accordance  with  journal  entry  16. 

Accounts  74  and  75  Care  of  Buildings  and  Grounds. — 
Debit  through  the  voucher  register  with  the  salaries  and  sup- 
plies, also  for  the  accrued  wages.  There  is  no  provision  for  an 
inventory  of  supplies  on  hand. 

The  balances  of  these  accounts  are  closed  into  care  of  build- 
ings and  grounds,  which  is  distributed  to  the  operating  de- 
partments in  accordance  with  journal  entry  14. 

Accounts  76,  77  and  78  Gas,  Water  and  Insurance. — These 
accounts  are  charged  through  the  voucher  register  for  the  cost 
of  the  items  when  purchased.  Account  78  is  adjusted  at  the 
end  of  the  year  for  insurance  prepaid,  the  debit  being  to  ac- 
count 12. 

The  balances  of  the  accounts  are  distributed  to  the  various 


266      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

operating  accounts  in  accordance  with  journal  entries  10,  11 
and  12. 

Account  79  Conveyances. — Debit  for  the  salaries  of  the 
ambulance  drivers,  stable  and  garage  expense  and  repairs  to 
equipment.  The  balance  represents  the  cost  of  upkeep  of 
equipment  and  is  closed  to  account  80. 

Account  80  General  Expense. — This  account  is  carried  on 
the  books  to  take  care  of  any  general  expense  not  provided  for 
elsewhere.  It  is  charged  at  the  close  of  the  year  with  the  bal- 
ance of  account  79  and  is  then  distributed  over  accounts  81  to 
86  inclusive  in  accordance  with  journal  entry  46. 

Account  8 1  Cost  of  Nurses. — This  is  used  only  at  the  end  of 
the  year  to  assemble  the  cost  of  nurses  and  the  balance  is  dis- 
tributed to  the  wards,  accounts  82  to  86  inclusive,  on  the  basis 
of  the  nurse  days  in  each  ward. 

Accounts  82  and  86  Expenses  by  Units. — These  accounts 
are  used  only  at  the  end  of  the  year  and  are  charged  with  the 
proper  proportion  of  the  operating  expenses  of  the  hospital.  In 
other  words,  in  the  final  analysis  the  expense  of  operating  the 
hospital  is  apportioned  to  the  five  departments  or  wards  in  order 
to  determine  whether  each  is  self-supporting  or  not. 


CHAPTER  XXX 
JOURNAL  ENTRIES 

The  various  transactions  incident  to  the  operation  of  the  hos- 
pital during  the  year  are  recorded  in  the  superintendent's 
ledger.  No  effort  is  made  to  record  transactions  in  the  treas- 
urer's ledger  other  than  those  affecting  investments  such  as  the 
purchase  or  sale  of  securities,  mortgages,  etc.,  and  the  recording 
of  income  received  from  investments  either  directly  or  from  the 
trustees  of  the  various  funds. 

Entries  are  made  in  the  treasurer's  cash  book  for  amounts 
paid  to  the  superintendent  to  meet  current  expenses,  but  as  a 
general  rule  no  postings  are  made  until  the  close  of  the  year. 

The  particular  problem  involved  in  the  closing  of  the  ac- 
counts at  the  end  of  the  year  is  in  connection  with  the  super- 
intendent's ledger.  By  reviewing  the  functions  of  the  various 
accounts  in  the  preceding  chapters,  it  will  be  noted  that  the 
general  plan  is  to  analyze  the  various  expenses  during  the  year 
and  at  the  close  of  the  period  to  distribute  them  directly  when 
possible,  or  in  the  form  of  overhead  when  the  expense  should 
be  assumed  by  all  departments. 

It  is  quite  evident  that  very  careful  attention  must  be  given 
to  the  problem  in  order  to  distribute  these  expenses  equitably 
over  the  departmental  accounts.  The  journal  entries  shown  on 
pages  273  to  280  with  the  explanation  for  each  should  be  care- 
fully studied  in  order  to  have  in  mind  the  full  details  of  the 
distribution  on  which  depends  the  accuracy  of  the  annual  re- 
ports discussed  in  chapter  XXXI. 

Journal  entry  1  is  made  only  at  the  close  of  the  year  and  is 
for  the  purpose  of  bringing  on  to  the  books  the  revenue  earned 
in  the  year  which  has  not  been  billed  to  the  patients.  The 
charges  to  the  patients'  accounts  are  made  only  at  the  time  the 
bill  is  rendered,  therefore  earnings  are  not  taken  into  the  in- 
come account  until  the  bill  is  made.  We  find  ourselves  con- 
fronted with  the  situation  at  the  close  of  the  period  of  having 
various  amounts  due  from  patients  which  have  not  been  billed, 

267 


268      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

and  consequently  not  included  in  our  income.  The  patients' 
charge  cards  are  summarized  and  form  the  basis  of  journal 
entry  1  charging  account  3  in  the  superintendent's  ledger  and 
crediting  the  different  income  accounts. 

Journal  entries  2,  3,  4,  5,  6,  7  and  8  are  for  the  purpose  of 
bringing  on  to  the  books  the  physical  inventory  of  various  sup- 
plies. The  inventory  accounts  numbered  4  to  11  in  the  super- 
intendent's ledger  are  used  only  at  the  close  of  the  year  at 
which  time  a  physical  inventory  is  taken  in  each  department, 
the  operating  account  credited  and  the  inventory  account 
charged  for  the  physical  inventory  on  hand.  Therefore,  the 
basis  of  the  above  journal  entries  is  the  physical  inventory. 

Journal  entry  9  bringing  on  the  accrued  salaries  is  for  the 
purpose  of  charging  the  operating  accounts  with  the  expense 
incurred  during  the  year,  and  affects  all  salary  accounts  enu- 
merated in  the  chart  from  23  to  81  inclusive. 

In  preparing  the  figures  for  journal  entries  10  and  11  we 
note  that  some  of  the  departments  are  charged  direct.  This 
means  in  the  case  of  gas  and  water  that  the  supply  is  metered 
for  those  departments,  the  reading  of  the  meters  forming  the 
basis  of  the  charge.  The  gas  and  water  accounts  in  the  general 
ledger  are  analyzed  to  determine  the  amount  of  such  direct 
charges.  The  balance  of  the  account,  as  noted  in  the  explana- 
tion, is  distributed  on  the  basis  of  the  patient  days. 

The  head  nurse's  daily  reports,  form  28,  are  summarized  so 
that  we  have  the  total  patient  days  and  the  total  nurse  days  for 
each  ward.  In  making  distributions  on  the  basis  of  the  patient 
days  the  amount  to  be  distributed  is  divided  by  the  total  patient 
days.  The  quotient  thus  obtained  is  multiplied  by  the  number 
of  patient  days  in  each  ward,  thus  determining  the  amount  of 
expense  chargeable  to  the  ward. 

The  same  method  of  computation  is  used  for  distributing 
charges  on  the  basis  of  nurse  days  except  that  the  total  nurse 
days  and  the  nurse  days  in  each  ward  are  used  instead  of  the 
patient  days. 

Journal  entry  12  closes  the  insurance  expense,  account  78, 
charging  the  various  departments  for  the  insurance  expired 
during  the  year  and  charging  the  unexpired  premiums  to  the 
prepaid  account,  12. 

The  method  used  in  arriving  at  the  amount  to  be  charged  each 


JOURNAL  ENTRIES  261) 

department  is  to  divide  the  total  insurance  expense,  that  is  the 
amount  of  insurance  expired  during  the  year,  by  the  total  valua- 
tion of  the  hospital  and  multiply  the  quotient  thus  obtained  by 
the  valuation  assigned  to  each  department. 

Journal  entry  13  is  perhaps  unnecessary  in  that  the  care  of 
buildings  expenses  could  be  distributed  from  the  subsidiary 
accounts  as  well  as  from  the  general  account.  However,  inas- 
much as  the  system  outlined  contemplates  closing  expense  ac- 
counts to  general  accounts,  the  journal  entry  is  used  in  all  cases. 

Journal  entry  14  distributes  the  care  of  buildings  and  grounds 
to  the  various  operating  departments  and  is  on  the  basis  of  the 
floor  space  occupied.  The  method  used  is  to  divide  the  cost  of 
care  of  buildings  and  grounds  by  the  total  floor  space  in  the 
institution  and  multiply  the  quotient  thus  obtained  by  the  floor 
space  in  each  department. 

Journal  entry  16  distributes  the  building  repairs  to  the  op- 
erating accounts  and  is  a  direct  distribution.  The  repairs  ac- 
count in  the  superintendent's  ledger  is  analyzed  and  each 
department  charged  for  the  repairs  made  during  the  year. 

Journal  entry  17  closes  to  the  general  account  the  subsidiary 
accounts  in  connection  with  heat,  light  and  power. 

It  will  be  noted  that  this  is  the  first  distribution  of  an  account 
which  has  previously  received  a  debit  for  other  than  direct 
expenses.  The  heat,  light  and  power  account  contains  two 
classes  of  debits.  The  first  are  the  direct  charges  incident  to 
supplying  heat,  light  and  power  to  the  institution  and  are  cov- 
ered by  accounts  67  to  71  in  the  superintendent's  ledger.  These 
subsidiary  accounts  are  closed  into  the  general  account  "heat, 
light  and  power,"  which  is  then  charged  as  will  be  noted  from 
the  preceding  journal  entries  with  a  proportion  of  the  general 
overhead,  which  constitutes  the  second  class  of  debits  to  the 
account. 

Expressing  this  thought  another  way,  we  find  by  referring  to 
journal  entry  9  that  the  salaries  accrued  on  account  of  heat, 
light  and  power  are  charged  through  this  journal  entry  to 
account  67.  This  is  a  direct  charge  and  one  of  the  first  class 
of  debits.  By  referring  to  journal  entries  10,  11  and  12,  we 
find  that  heat,  light  and  power  has  been  charged  through  these 
entries  with  gas,  water  and  insurance,  and  from  the  chart  of 
accounts  we  do  not  find  subsidiary  accounts  for  these  items 


27.0      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

listed.  In  other  words,  these  three  items,  gas,  water  and  in- 
surance, are  a  part  of  the  general  overhead  and  are  charged  to 
the  general  account,  "heat,  light  and  power,"  constituting  the 
second  class  of  debits. 

The  same  principle  applies  not  only  in  connection  with  this 
particular  account  but  with  all  of  the  accounts  which  are  dis- 
tributed. The  important  fact  to  be  brought  out  is  that  the  ad- 
justments enumerated  in  the  journal  entries  must  be  followed 
in  logical  sequence,  and  must  of  necessity  be  posted  to  the  con- 
trolling accounts  before  some  of  the  succeeding  journal  entries 
can  be  correctly  made. 

Journal  entries  14  and  16  charge  heat,  light  and  power  with 
a  proportion  of  the  care  of  buildings  and  repairs ;  journal  entry 
18  distributes  the  total  heat,  light  and  power  account  after  all 
adjustments  have  been  posted  to  the  operating  accounts  and  it 
would  be  manifestly  incorrect  if  we  worked  out  the  data  for 
journal  entry  18  before  all  of  the  adjustments  included  in 
journal  entries  1  to  17  inclusive  had  been  posted  to  the  gen- 
eral accounts. 

Putting  the  problem  another  way,  in  working  out  the  annual 
adjusting  entries  each  entry  as  made  must  be  posted  before  the 
analysis  of  the  general  ledger  accounts  affected  can  be  made,  in 
order  to  have  the  succeeding  journal  entries  correct.  This  prin- 
ciple should  be  kept  carefully  in  mind,  and  as  a  suggestion,  in 
order  that  the  problems  may  be  fully  understood,  it  would  be 
well  if  a  sheet  of  analysis  paper  were  used  and  the  various 
operating  accounts  charted  so  as  to  show  at  what  point  the 
various  accounts  have  been  charged  with  overhead  and  the  rate 
of  distribution. 

The  heat,  light  and  power  account  is  distributed  over  the 
operating  departments  on  the  basis  of  kilowatt  hours.  The  engi- 
neer estimates  the  total  amount  of  current  generated.  He  also 
estimates  the  cost  of  power  furnished  to  the  laundry  and  the 
kitchen.  He  estimates  as  correctly  as  possible  the  cost  per 
kilowatt  hour  of  all  current  generated  and  the  amount  of  cur- 
rent consumed  by  each  department. 

After  these  estimates  have  been  made  we  proceed  to  distribute 
the  cost  of  lighting  on  the  basis  of  the  kilowatt  hours  as  shown 
by  journal  entry  18  and  the  cost  of  power  as  shown  by  journal 
entry  19.  The  balance  of  the  account  is  then  considered  to 


JOURNAL  ENTRIES  271 

represent  the  cost  of  heating  and  is  distributed  on  the  basis  of 
the  space  occupied  by  each  department. 

Here  again,  we  meet  with  the  problem  in  distribution  out- 
lined above,  which  is  that  each  journal  entry  must  be  posted 
or  carefully  recorded  before  the  next  journal  entry  can  be  made. 

It  is  necessary  before  making  journal  entry  20  to  post  or 
otherwise  determine  the  balance  remaining  in  the  account  after 
journal  entries  18  and  19  have  been  prepared,  or  our  distribu- 
tion in  journal  entry  20  will  be  incorrect. 

Journal  entry  20  closes  the  heat,  light  and  power  account  and 
we  have  distributed  the  cost  of  this  item  over  the  various  operat- 
ing accounts,  the  result  being  that  in  the  final  analysis  we  have 
all  of  our  expenses  included  in  unit  accounts  81  to  86  inclusive. 

Journal  entry  21  closes  the  subsidiary  food  accounts  into  the 
general  account,  and  journal  entry  22  distributes  the  cost  of 
food  to  the  operating  accounts.  This  distribution,  as  will  be 
noted,  is  made  on  the  basis  of  quarterly  tests  of  food  supplied 
to  the  various  departments. 

Journal  entry  23  closes  unit  accounts  51  and  52  into  the  gen- 
eral laundry  account  which  has  previously  been  charged  with  a 
proportion  of  the  general  overhead  as  shown  by  journal  entries 
9,  10,  11,  12,  14,  16,  18,  19  and  20.  The  laundry  account  is 
distributed  through  journal  entry  24,  the  basis  used  for  this 
distribution  being  the  number  of  pieces  of  laundry  for  each 
department,  determined  by  periodical  tests. 

Journal  entry  25  closes  the  direct  expenses  of  the  kitchen  and 
dining  room  to  the  general  account,  and  journal  entry  26  dis- 
tributes the  cost  of  kitchen  and  dining  room  expense  for  the  year 
to  the  operating  accounts  and  is  on  the  same  basis  as  the  food 
distribution. 

Journal  entry  27  closes  the  subsidiary  housekeeping  accounts 
to  the  general  account,  and  journal  entry  28  distributes  the 
general  account  to  unit  accounts  81  to  86  inclusive. 

It  will  be  noted  from  the  explanation  that  the  charge  to  the 
cost  of  nurses  is  for  the  actual  housekeeping  expenses.  This  is 
determinable  as  a  nurses'  home  is  maintained  and  the  house- 
keeping expenses  of  the  same  are  in  no  way  confused  with  the 
housekeeping  expenses  of  the  hospital. 

Journal  entry  29  closes  the  salaries  and  wages  of  employees 
in  the  nurses'  home  into  the  cost  of  nurses'  account. 


272      SYUTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Journal  entries  30,  31,  32  and  33  transfer  the  various  sub- 
sidiary accounts  to  the -corresponding  general  accounts. 

Journal  entry  34  distributes  the  general  account  called  de- 
partment expense  to  the  wards.  It  will  be  noted  that  the  out- 
patient department  has  not  been  charged  inasmuch  as  this  de- 
partment does  not  use  either  the  pathological  laboratory  or  the 
apothecary  department  which  are  considered  department  ex- 
penses. The  basis  for  distribution  in  journal  entry  34  is  that 
of  patient  days. 

Journal  entry  35  closes  the  subsidiary  accounts  to  the  gen- 
eral outpatient  department  account. 

Journal  entry  36  closes  subsidiary  accounts  33  to  39  into  gen- 
eral surgical  supplies  account,  and  journal  entry  37  distributes 
the  cost  of  surgical  supplies  to  the  wards. 

It  will  be  noted  that  account  82,  medical  wards,  is  not  charged 
with  a  portion  of  the  surgical  supplies  expense,  as  it  is  consid- 
ered that  this  ward  does  not  use  surgical  supplies.  If  a  patient 
requires  surgical  care,  he  is  assigned  to  the  surgical  ward  and 
not  to  the  medical  ward. 

Journal  entry  38  closes  the  subsidiary  medical  supplies  ac- 
count and  journal  entry  39  distributes  the  cost  of  medical  sup- 
plies to  all  the  wards. 

It  will  be  noted  that  the  basis  for  distributing  medical  sup- 
plies is  that  of  patient  days. 

Journal  entry  40  closes  subsidiary  accounts  26  and  27  to  the 
cost  of  nurses.  It  will  be  noted  that  account  28,  orderlies,  is 
charged  to  professional  care  of  patients  in  journal  entry  41, 
while  the  salaries  of  the  superintendent  of  nurses,  assistants  and 
instructors,  and  the  salaries  of  nurses  are  charged  direct  to  the 
cost  of  nurses. 

Journal  entry  42  distributes  the  expense  of  orderlies  and 
interns,  which  has  previously  been  closed  to  professional  care 
of  patients,  to  the  wards  with  the  exception  of  the  outpatient 
department,  account  86,  which  does  not  incur  expense  of  this 
kind. 

Journal  entry  43  closes  subsidiary  accounts  23,  24  and  25  to 
administration,  and  journal  entry  44  distributes  administration 
to  the  five  hospital  departments  and  also  to  the  cost  of  nurses. 

The  basis  for  distribution  is  an  arbitrary  charge  of  25%  to 
the  cost  of  nurses  and  the  balance  on  the  basis  of  patient  days, 


JOURNAL  ENTRIES  273 

the  number  of  treatments  in  the  outpatient  department  being 
considered  equivalent  to  the  patient  day. 

Journal  entry  45  closes  to  general  expense  the  cost  of  con- 
veyances as  shown  by  account  79,  and  journal  entry  46  dis- 
tributes general  expense  on  the  basis  of  15%  to  the  cost  of 
nurses  and  the  balance  to  the  five  departments. 

Journal  entries  48  and  49  are  the  closing  entries  for  the  super- 
intendent's  ledger  transferring  the  balance  in  the  income  and 
expense  accounts  to  the  superintendent's  account  with  the 
treasurer.  The  treasurer,  in  order  to  agree  the  balance  of  his 
account  with  the  superintendent's,  must  of  necessity  enter  the 
total  income  and  the  total  expenses  of  the  hospital  in  his  account 
with  the  superintendent,  at  the  same  time  crediting  account  5 
for  the  earnings  and  charging  account  20  for  the  expenses,  thus 
bringing  on  to  his  books  in  total  the  result  of  operations  for 
the  year  as  recorded  in  detail  in  the  superintendent's  ledger. 


BAY  STATE  HOSPITAL 
ADJUSTING  AND  CLOSING  ENTRIES 

L     Accounts  Due  from  Patients 

To  Board  of  Private  Room  Patients 
Board  of  Ward  Pay  Patients 
Board  of  Friends  or  Parents 
Special  Nursing* 
Outpatient  Dept. 
X-Ray 
Miscellaneous 

To  bring  on  to  the  books  accrued  income  not  charged  to 

patients 

2  Medical  Supplies 

To  Drugs 

Alcohol,  Wines  and  Liquors 
Rubber  Goods 
Miscellaneous 

Medical  Supplies  on  hand  as  per  inventory 

3  Surgical  Supplies 
Appliances  and  Instruments 

To  Gauze 
Bandages 
X-Ray  Supplies 
Apparatus  and  Instruments 
Absorbent  Cotton 
Ether 

Rubber  Goods 
Pathological  Dept.  Supplies 

Surgical  Supplies  on  hand  as  per  inventory 


274      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

4  Crockery  and  Kitchen  Supplies 

To  Kitchen  and  Dining  Room  Supplies 
Laundry  Supplies 

Kitchen,   Dining  Room  and   Laundry  supplies  on  hand  as 
per  inventory 

5  Housekeeping  Supplies 

To  Housekeeping 
Dry  Goods 
Soap 
General  Supplies 

Housekeeping  Supplies  on  hand  as  per  inventory 

6  Printing  and  Stationery 

To  Stationery,  Printing  anJ  Postage- 
Stationery  and  Postage  on  hand  as  per  inventory 

7  Coal 

To  Heat,  Light  and  Power — Coal 

Fuel  on  hand  per  inventory 

8  Food  Supplies 

To  Butter 

Cereal,  Rice,  Meals,  etc. 

Coffee,  Tea,  Cocoa  and  Chocolate 

Eggs 

Fish 

Flour 

Fruit 

Meat 

Milk 

Potatoes 

Poultry 

Sugar 

Vegetables 

Sundry  Food  Supplies 

Food  supplies  on  hand  as  per  inventory 

9  Salaries  and  Wages 

Officers  and  Clerks 

Supt.  of  Nurses,  Assistants  and  Instructors 
Orderlies 
Nurses 

Pathological  Dept. 
Apothecary  Dept. 
Nurses'  Home- 
Housekeeping 
Kitchen  and  Dining  Room 
Laundry 

Heat.  Light  and  Power 
Repairs  to  Buildings 
Care  of  Buildings  and  Grounds 
To  Sundry  Accrued  Liabilities 

To  bring  on  to  the  books  salaries  and  wages  accrued  and 

not  paid 

10     Pathological  Dept. 
Cost  of  Nurses 
Medical  Wards 
Surgical  Wards 
Maternity  Wards 


JOURNAL  ENTRIES  275 

Private  Patient  Wards 
Outpatient  Dept. 
Kitchen  and  Dining  Room 
Laundry 

.  Heat,  Light  and  Power 
To  Gas 

To  distribute  cost  of  gas  used  for  the  year ;  direct  to 
kitchen  and  dining  room,  laundry,  power  plant,  pathologi- 
cal dept.  and  nurses'  home — balance  on  patient  days 

11  Pathological  Dept. 
Apothecary  Dept. 
Cost  of  Nurses 

Kitchen  and  Dining  Room 

Laundry 

Heat,  Light  and  Power 

Medical  Wards 

Surgical  Wards 

Maternity  Wards 

Private  Patient  Wards 

Outpatient  Dept. 
To  Water 

To  distribute  cost  of  water  for  the  year;  direct  to  patho- 
logical dept.,  apothecary  dept.,  cost  of  nurses,  kitchen  and 
dining  room,  laundry,  heat,  light  and  power — balance  on 
patient  days 

12  Insurance  Unexpired 
Administration 
Pathological  Dept. 
Apothecary  Dept. 
Cost  of  Nurses 

Kitchen  and  Dining  Room 

Laundry 

Heat,  Light  and  Power 

Medical  Wards 

Surgical  Wards 

Maternity  Wards 

Private  Patient  Wards 

Outpatient  Dept. 
To  Insurance 

To  distribute  cost  of  insurance  for  year — on  basis  of  valua- 
tion 

13  Care  of  Buildings  and  Grounds 

To  Care  of  Buildings  and  Grounds 
Salaries  and  Wages 
Supplies 

To  transfer  balance  of  latter  accounts 

14  Administration 
Pathological  Dept. 
Apothecary  Dept. 
Cost  of  Nurses 

Kitchen  and  Dining  Room 

Laundry 

Heat,  Light  and  Power 

Medical   Wards 

Surgical  Wards 

Maternity  Wards 

Private  Patient  Wards 


276      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

Outpatient  Dept. 

To  Care  of  Buildings  and  Grounds 

To   distribute   cost   of   care  of   buildings   and  grounds  on 
basis  of  space  occupied 

15  Repairs  to  Buildings 

To  Repairs  to  Buildings 
Salaries  and  Wages 
Supplies 

To  transfer  balances  of  latter  accounts 

16  Administration 
Pathological  Dept 
Apothecary  Dept. 
Cost  of  Nurses 

Kitchen  and  Dining  Room 
Laundry 

Heat,  Light  and  Power 
Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Repairs  to  Buildings 

To  distribute  cost  of  repairs  to  buildings — direct  charges 

17  Heat,  Light  and  Power 

To  Heat,  Light  and  Power 
Salaries  and  Wages 
Coal 

Electrical  Supplies 
Repairs  and  Renewals 
Oil,  Waste,  etc. 

To  transfer  balances  of  latter  accounts 

18  Administration 
Pathological  Dept. 
Apothecary  Dept. 
Kitchen  and  Dining  Room 
Laundry 

Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Heat,  Light  and  Power 

To  distribute  cost  of  electric  lighting  for  year  on  basis  of 

kilowatt  hours 

19  Kitchen  and  Dining  Room 
Laundry 

To  Heat,  Light  and  Power 

Cost  of  power  furnished  to  kitchen  and   laundry  for  the 
year  apportioned  by  engineer 

20  Administration 
Pathological  Dept. 
Apothecary  Dept. 
Kitchen  and  Dining  Room 
Laundry 

Medical  Wards 


JOURNAL  ENTRIES  277 

Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Heat,  Light  and  Power 

To  distribute  cost  of  heating  and  ventilating  for  year  on 

the  basis  of  space  occupied 

21  Food 

To  Butter 
Cereal 

Coffee,  Tea,  Cocoa  and  Chocolate 
Eggs 
Fish 
Flour 
Fruit 
Meat 
Milk 
Potatoes 
Poultry 
Sugar 
Vegetables 
Sundry  Food  Supplies 

To  transfer  balances  of  latter  accounts 

22  Administration 

Professional  Care  of  Patients  (House  Officers) 

Housekeeping 

Kitchen  and  Dining  Room 

Cost  of  Nurses 

Medical  Wards 

Surgical  Wards 

Maternity  Wards 

Private  Patient  Wards 

Outpatient  Dept.    (Employees) 
To  Food 

To  distribute  cost  of  food  for  the  year  on  the  basis  of 
quarterly  test  of  food  supplies  to  various  departments 

23  Laundry 

To  Laundry 

Salaries  and  Wages 
Supplies 

To  transfer  balances  of  latter  accounts 

24  Administration 
Pathological  Dept. 
Apothecary  Dept. 
Kitchen  and  Dining  Room 
Cost  of  Nurses 

Medical  Wards 

Surgical  Wards 

Maternity  Wards 

Private  Patient  Wards 

Outpatient  Dept. 
To  Laundry 

To  distribute  cost  of  laundry  for  the  year  on  basis  of 
periodical  tests  of  number  of  pieces  laundered  for  various 
departments 


278      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

25  Kitchen  and  Dining  Room 

To  Kitchen  and  Dining  Room 
Salaries  and  Wages 
Supplies 

To  transfer  balances  of  latter  accounts 

26  Administration 

Professional  Care  of  Patients   (House  Officers) 

Housekeeping 

Cost  of  Nurses 

Medical  Wards 

Surgical  W7ards 

Maternity  Wards 

Private  Patient  Wards 

Outpatient  Dept. 

To  Kitchen  and  Dining  Room 

To  distribute  the  cost  of  kitchen  and  dining  room  expense 
for  the  year,  same  basis  as  food  distribution 

27  Housekeeping 

To  Housekeeping 

Salaries  and  Wages 

Dry  Goods 

Soap 

General  Supplies 

To  transfer  the  balances  of  latter  accounts 

28  Cost  of  Nurses 
Medical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Housekeeping 

To  distribute  the  housekeeping  expenses  for  the  year  direct 
to  cost  of  nurses — balance  on  basis  of  patient  days 

29  Cost  of  Nurses 

To  Nurses'  Home — Salaries  and  Wages 

To  transfer  the  balance  of  the  latter  account 

30  Apothecary  Department 

To  Apothecary  Dept. — Salaries  and  Wages 

To  transfer  the  balance  of  the  latter  account 

31  Department  Expense 

To  Apothecary  Dept. 

To  transfer  the  balance  of  the  latter  account 

32  Pathological  Laboratory 

To  Pathological  Laboratory 
Salaries  and  Wages 
Supplies 

To  transfer  the  balance  of  the  latter  accounts 

33  Department  Expense 

To  Pathological  Laboratory 

To  transfer  the  balance  of  the  latter  account 

34  Medical  Wards 
Surgical  Wards 
Maternity  Wards 


JOURNAL  ENTRIES  279 

Private  Patient  Wards 
To  Department  Expense 

To  distribute  the  cost  of  pathological  dept.  and  apothecary 
dept.  on  the  basis  of  patient  days 

35     Outpatient  Department 

To  Outpatient  Department — Salaries  and  Wages 

To  transfer  the  balance  of  the  latter  account 

36.    Surgical  Supplies 
To  Gauze 
Bandages 

X-Ray  Supplies  , 

Apparatus  and  Instruments 
Absorbent  Cotton 
Ether 
Rubber  Goods 

To  transfer  the  balances  of  the  latter  accounts 

37  Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Surgical  Supplies 

To  distribute  the  cost  of  surgical  supplies  for  the  year 
direct  to  outpatient  dept.  and  private  patient  wards — 
balance  on  patient  days 

38  Medical  Supplies 

To  Drugs 

Alcohol,  Wines  and  Liquors 
Rubber  Goods 
Miscellaneous 

To  transfer  the  balances  of  the  latter  accounts 

39  Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Medical   Supplies 

To  distribute  the  cost  of  medical  supplies  used  on  the  basis 
of  patient  days 

40  Cost  of  Nurses 

To  Salaries  and  Wages 

Supt.  of  Nurses,  Assistants  and  Instructors 
Nurses 

To  transfer  balances  of  latter  accounts 

41  Professional  Care  of  Patients 

To  Salaries  and  Wages — Orderlies 

To  transfer  balance  of  latter  account 

42  Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 

To  Professional  Care  of  Patients 

To  distribute  the  expense  of  orderlies  and  interns  on  the 
basis  of  patient  days 


280      SYMTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

43  Administration 

To  Administration 

Salaries  and  Wages 

Stationery,  Printing  and  Postage 

Telephone  and  Telegrams 

To  transfer  the  balances  of  the  latter  accounts 

44  Cost  of  Nurses 
Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Administration 

To  distribute  the  expense  of  administration  for  the  year; 
25%  to  cost  of  nurses — balance  on  basis  of  patient  days 

45  General  Expense 

To  Conveyances 

To  transfer  the  balance  of  the  latter  account 

46  Cost  of  Nurses 
Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  General  Expense 

To   distribute  the  general   expenses  for  the  year;    15%   to 
cost  of  nurses — balance  on  basis  of  patient  days 

47  Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  Cost  of  Nurses 

To  distribute  the  cost  of  nurses  for  the  year  on  the  basis 
of  nurse  days 

48  Board  of  Private  Patients 
Board  of  Ward  Pay  Patients 
Board  of  Friends  or  Parents 
Special  Nursing 
Outpatient  Dept. 
Operations 

X-Ray 
Miscellaneous 

To  Superintendent's  Account  with  Treasurer 

To  transfer  the  hospital  earnings  for  the  year 

49  Superintendent's  Account  with  Treasurer 

To  Medical  Wards 
Surgical  Wards 
Maternity  Wards 
Private  Patient  Wards 
Outpatient  Dept. 

To  transfer  the  hospital  expenses  for  the  year 


CHAPTER  XXXI 

PREPARING  REPORTS 

The  annual  reports  are  prepared  from  two  sources ;  first  from 
the  superintendent's  ledger,  showing  the  detailed  operations  of 
the  hospital  during  the  year,  and  then  from  the  treasurer's 
ledger,  showing  in  detail  the  accounting  of  the  officer  charged 
with  the  responsibility  of  administering  the  affairs  of  the  insti- 
tution. 

Manifestly  it  is  quite  impossible  to  close  the  treasurer's  ledger, 
much  less  prepare  the  annual  report,  until  all  of  the  transac- 
tions recorded  in  the  superintendent's  ledger  have  been  adjusted 
and  his  reports  prepared  and  reconciled.  It  will  be  found  by 
referring  to  the  explanation  of  the  accounts  in  the  treasurer's 
ledger  that  certain  accounts  therein  are  debited  or  credited  with 
amounts  as  shown  by  the  superintendent's  annual  report.  The 
annual  reports  therein  referred  to  are  shown  in  detail  on  pages 
286  to  295. 

The  superintendent's  balance  sheet,  exhibit  B,  page  288,  is 
nothing  more  nor  less  than  a  trial  balance  taken  from  the  super- 
intendent's ledger  after  closing  and  shows  the  cash  and  other 
assets  on  hand,  the  liabilities  outstanding,  and  an  analysis  of 
the  superintendent's  account  with  the  treasurer. 

In  the  sample  of  exhibit  B  submitted  on  page  288  this  analysis 
of  the  superintendent's  account  with  the  treasurer  is  grouped 
with  the  liabilities  inasmuch  as  the  operations  of  the  hospital 
invariably  result  in  a  profit,  at  least  in  the  superintendent's 
ledger,  and  at  the  close  of  the  year  a  balance  is  due  from  the 
superintendent  to  the  treasurer,  or,  in  other  words,  there  is  a 
liability  of  the  superintendent  to  the  treasurer.  If  the  opera 
tions  of  the  hospital  resulted  in  a  lass,  or  the  treasurer  did  not 
reimburse  the  superintendent  for  all  of  his  expenditures,  thus 
making  a  debit  balance  in  the  superintendent's  account  with  the 
treasurer,  the  analysis  of  the  account  would  be  grouped  with  the 
assets,  inasmuch  a«  the  debit  balance  would  represent  an  amount 

281 


282       SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

due  the  superintendent  from  the  treasurer,  or  an  account 
receivable. 

In  the  analysis  of  the  superintendent's  account  with  the 
treasurer  reference  is  made  to  hospital  earnings,  exhibit  C,  and 
hospital  expenses,  exhibit  D.  These  exhibits  are  made  up  after 
adjusting,  but  before  the  income  and  expense  accounts  are 
closed  or,  in  other  words,  in  preparing  exhibits  the  journal 
entry  closing  the  income  and  expenses  to  the  treasurer's  ac- 
count is  analyzed  into  its  component  parts.  Exhibit  C  is  the 
balance  of  accounts  15  to  22,  exhibit  D  is  made  from  the  bal- 
ances of  accounts  82  to  86  after  all  adjustments  for  the  year 
have  been  made. 

The  other  item  in  the  analysis  of  the  superintendent's  account 
with  the  treasurer  requiring  explanation  is  the  loss  on  bad 
accounts,  and  by  referring  to  the  explanation  of  account  3  in 
the  superintendent's  ledger  we  find  that  account  3  is  credited 
for  bad  accounts  charged  off,  the  offsetting  debit  being  to  ac- 
count 0,  superintendent's  account  with  the  treasurer.  The  in- 
formation for  this  item,  therefore,  would  be  taken  direct  from 
the  superintendent's  account  with  the  treasurer  and  would  rep- 
resent the  total  amount  due  from  patients  determined  to  be 
uncollectible  and  charged  off  during  the  year.  In  the  treas- 
urer's ledger  the  charge  is  to  surplus  and  deficit,  account  24. 

These  three  exhibits,  B,  C  and  D,  constitute  the  principal 
reports  prepared  by  the  superintendent  and  are  those  which  tie 
in  with  the  treasurer's  report  and  upon  which  he  is  first  de- 
pendent for  making  his  closing  and  reports. 

The  different  schedules,  1  to  7  inclusive,  shown  on  pages  290 
to  295  are  subsidiary  to  exhibit  D,  schedule  1  showing  in  detail 
the  cost  of  operations  classified  according  to  the  ledger  accounts. 
The  total  of  this  schedule  should  agree  with  the  total  cost  of 
operations  shown  on  exhibit  D.  Schedules  2  to  6  inclusive  show 
the  details  of  items  charged  to  the  wards  in  the  form  of  debits 
to  accounts  82  to  86  inclusive  and  the  total  of  each  schedule 
should  agree  with  the  cost  of  operations  charged  to  each  ward 
in  exhibit  D. 

Schedule  7  shows  in  detail  the  items  making  up  the  cost  of 
nurses  and  is  an  analysis  of  the  debits  to  account  81.  The  total 
cost  of  nurses  as  shown  on  schedule  7  should  agree  with  the 
balance  of  account  81  in  the  superintendent's  ledger.  The  dis- 


PREPARING  REPORTS  283 

tribution  at  the  bottom  of  the  page  is  the  apportionment  of  the 
cost  of  nurses  to  the  different  wards  on  the  basis  of  nurse  days 
and  is  recorded  in  journal  entry  47.  The  amounts  thus  appor- 
tioned on  the  basis  of  nurse  days  are  transferred  to  schedules 
2  ID  6  inclusive,  constituting  the  cost  of  nurses  in  each  ward 
for  tlie  year. 

These  schedules  are  prepared  from  the  ledger  accounts  using 
as  a  subsidiary  source  of  information  the  voucher  register  and 
analysis  sheets. 

When  the  various  exhibits  and  schedules  have  been  prepared 
from  the  superintendent's  ledger  the  work  of  adjusting  and 
closing  the  treasurer's  ledger  and  preparing  the  annual  report 
is  taken  up. 


CHAPTER  XXXII 

ANNUAL  REPORTS 

The  treasurer's  annual  report  naturally  divides  itself  into 
two  distinct  sections;  the  first  includes  the  balance  sheet,  ex- 
hibit A,  shown  on  page  286  and  referred  to  in  chapter  XXXI. 
This  exhibit  is  supported  by  schedule  1,  which  is  a  copy  of  the 
information  shown  in  the  superintendent's  balance  sheet,  exhibit 
B,  supplemented  by  details  taken  from  treasurer's  account  24. 

The  schedule  is  in  fact  nothing  more  nor  less  than  an  analysis 
of  the  surplus  and  deficit  account  in  the  treasurer's  ledger  show- 
ing the  income  received  in  addition  to  the  current  operations  of 
the  hospital  and  expenses  in  addition  to  those  covered  by  the 
superintendent's  reports. 

The  second  section  of  the  treasurer's  annual  report  sup- 
plementing the  first  is  prepared  by  the  treasurer  and  sets  forth 
the  result  of  the  year's  work  as  administrator  of  the  funds  of 
the  institution.  This  section  of  the  report  should  show  in  more 
or  less  detail  the  various  changes  in  the  investments  made  dur- 
ing the  year  with  the  resulting  profit  or  loss,  which  is  sum- 
marized in  exhibit  A,  schedule  1.  This  general  review  of  the 
changes  should  be  supported  by  a  schedule  of  the  securities, 
mortgages,  etc.,  on  hand  at  the  beginning  and  end  of  the  year 
and  possibly  showing  the  cost  or  book  value  and  the  current 
market  value  in  order  that  comparisons  may  be  made  to  deter- 
mine whether  the  investments  should  be  held  or  disposed  of  to 
the  best  advantage. 

The  superintendent's  report  to  the  treasurer  furnishes  the 
hasis  for  part  of  the  manuscript  in  the  treasurer's  report  which 
would  outline  in  brief  some  statistics  in  connection  with  the 
year's  work,  showing  the  number  of  patients  in  the  different 
wards  and  possibly  supported  by  vital  statistics  showing  the 
result  of  some  of  the  cases. 

The  treasurer's  report  as  a  general  rule  is  submitted  to  the 
board  of  trustees  of  the  institution  and  at  the  time  the  report 
is  submitted  the  treasurer  is  called  upon  for  various  suggestions 

284 


ANNUAL  REPORTS  285 

and  for  his  opinion  as  to  matters  of  policy  in  the  conduct  of 
the  institution  and  is  sometimes  called  upon  to  account  for  the 
conduct  of  the  business  during  his  administration.  It  frequently 
occurs  in  a  case  of  this  kind  that  the  superintendent  is  asked 
for  suggestions. 

The  detailed  information  contained  in  the  superintendent's 
schedules,  which  are  made  a  part  of  the  treasurer's  report,  is 
made  use  of  to  determine  whether  the  cost  of  operating  certain 
wards  is  excessive,  or  may  serve  as  a  guide  for  the  regulation  of 
expenses  to  be  incurred  during  the  coming  year. 

On  account  of  the  nature  of  the  institution  and  the  source 
from  which  its  support  is  derived,  careful  management  must  of 
necessity  be  the  rule  in  order  to  avoid  incurring  expenses  which 
will  result  in  a  serious  deficit  from  operations. 

In  the  preparation  of  the  treasurer's  report  and  the  closing 
of  his  ledger,  while  in  many  ways  purely  mechanical  bookkeep- 
ing work,  a  thorough  knowledge  of  accounting  principles  is 
necessary  and  a  complete  understanding  of  the  treatment  to  be 
given  various  classes  of  income  is  highly  essential  in  order  to 
have  the  report  properly  prepared  and  in  such  form  as  can  be 
submitted  to  the  board  of  trustees  so  as  to  be  intelligible  to 
them. 


286      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


ASSETS 

Capital  Assets 

Sites  and  Grounds 

Buildings 

Furniture  and  Fixtures 

Machinery  and  Tools 

Apparatus  and  Instruments 

Ambulances,  Horses,  and  Equipment 

Total  Capital  Assets 

Investments 

From  General  Funds 
Mortgages 
Bonds 
Stocks 

From  Special  Endowment  Funds 
Mortgages 
Bonds 
Stocks 

From  Endowed  Bed  Fund 
Mortgages 
Bonds 
Stocks 

Total  Investments 

Current  Assets 

Cash  in  Hands  of  Treasurer 
Cash  in  Hands  of  Superintendent 
Petty  Cash  Fund 
Accounts  Due  from  Patients 
Sundry  Accounts  Receivable 
General  Material  on  Hand 
Accrued  Interest  on  Investments 
Unexpired  Insurance 

Tocal  Current  Assets 
Deficit  (see  Schedule  1) 


BAY  STATE 

EXHIBIT 

BALANCE  SHEET 


***  *» 
***  ** 
**»  ** 


**  ** 
**  «* 

**  ** 


**  ** 
**  ** 
*»  *» 


**  ** 
**  ** 
**  ** 


***  ** 
**  #* 


ANNUAL  REPORTS  287 

HOSPITAL 
A 

,19.... 

LIABILITIES 

Capital  Liabilities 

Capital    (Hospital  Properties  and  Equipment) 
General  Endowment  Fund  **«*  #* 

Special  Endowment  Funds  ***  ** 

Endowed  Bed  Funds  ***  ** 

Total  Capital  Liabilities  ****  ** 

Current  Liabilities 

Vouchers  Payable  **  ** 

Sundry  Accrued  Liabilities  *  ** 

Total  Current  Liabilities  **  ** 

Surplus   (see  Schedule  1)  **  ** 


288      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

BAY  STATE  HOSPITAL 
EXHIBIT  A— SCHEDULE   1 
SURPLUS  AND  DEFICIT  ACCOUNT. .  . .  19. . 


CHABGES 

Deficit  December  31,  19— 

Hospital  Expenses  for  the  Year   (see  Exhibit  D) 

Uncollectible  Accounts  Charged  Off 

Depreciation  of  Capital  Assets  Charged  Off 

Losses  on  Investments  Sold 

Losses  Due  to  Adjustments  of  Investments 

Total  Charges 


CREDITS 

Surplus  December  31,  19 — 

Hospital  Earnings  for  the  Year  (see  Exhibit  C) 

Donations  Received  for  Current  Purposes 

Income  from  General  Endowment  Fund  Investments 

Income  from  Special  Endowment  Funds 

Profit  on  Sale  of  Investments 

Total  Credits 

Net  Deficit  (or  Surplus)  for  the  Year 


BAY  STATE  HOSPITAL 
EXHIBIT  B 

SUPERINTENDENT'S  BALANCE  SHEET 19 . 

ASSETS 


Cash 

Petty  Cash  Fund 

Accounts  Due  from  Patients 

Inventories 

Medical  Supplies 
Surgical  Supplies 
Appliances  and  Instruments 
Crockery  and  Kitchen  Supplies 
Housekeeping  Supplies 
Printing  and  Stationery 
Coal 
Food  Supplies 

Unexpired  Insurance 
Total  Assets 


***  ** 
***  ** 
***  «* 
**«  ** 


ANNUAL  REPORTS  289 

LIABILITIES 

Vouchers  Payable  ****  ** 

Sundry  Accrued  Liabilities  ***  ** 

Superintendent's  Account  with  Treasurer 

Balance  December  31,  19 — 

Cash  Received  from  Treasurer 

Hospital  Earnings  for  the  Year 

(see  Exhibit  C)  *****  ** 


Less 

Cash  Paid  to  Treasurer 
Loss  on  Bad  Accounts 
Hospital  Expenses  for  the 

Year  (see  Exhibit  D)  *****  ** 


Total  Liabilities 


HOSPITAL  EARNINGS  FOR  THE 
YEAR  ENDING..  ..,19.. 


Board  of  Private  Patients 

Board  of  Ward  Pay  Patients 

Board  of  Friends  or  Parents 

Special  Nursing 

Dispensary 

Operations 

X-Ray 

Miscellaneous 

Total  Earnings  for  the  Year 


BAY  STATE  HOSPITAL 
EXHIBIT  D 

SUMMARY  OF  APPORTIONMENT  OF  COST  OF   OPERATIONS  TO 
UNITS  OF  SERVICE— ONE  YEAR  ENDING 19. ... 


PATIENT  DAYS 
NUMBER   AVERAGE  COST 


Medical   Wards 
Surgical  Wards 
Maternity  Wards 
Private  Wards 
Outpatient  Department 


Total  Cost  of  Operations 


290      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  1 

STATEMENT  OF  COST  OF  OPERATIONS 
FOR  THE  YEAR  ENDING 19 .... 

ADMINISTRATION  EXPENSE 


Salaries — Officers  and  Clerks 
Stationery,  Printing  &  Postage 
Telephone  &  Telegraph  (including  wages) 

Total  Administration  Expense 


PROFESSIONAL  CARE  OF  PATIENTS 

Salaries  &  Wages 

Supt.  of  Nurses,  Assistants  and  Instructors 

Nurses 

Orderlies 


Medical  Supplies 

Drugs  ****  ** 

Alcohol,  Wines  &  Liquors  ***  ** 

Rubber  Goods 
Miscellaneous  ***  ** 


Surgical  Supplies 
Gauze 

Bandages  ****  ** 
X-Ray  Supplies 

Apparatus  &  Instruments  ****  ** 

Absorbent  Cotton  ***  ** 

Ether  ***  ** 

Rubber  Goods  ***  ** 

Miscellaneous  ****  **       ****  ** 


Outpatient  Department 
Salaries  &  Wages 


Total  Professional  Care  of  Patients 


DEPARTMENT  EXPENSE 


Pathological  Laboratory 
Salaries  &  Wages 
Supplies 

Apothecary  Department 
Salaries  &  Wages 

Nurses'  Home 

Salaries  &  Wages 


ANNUAL  REPORTS  291 

EXHIBIT  D— SCHEDULE  1    (CoNT.) 


Housekeeping 

Salaries  &  Wages 

Dry  Goods 

Soap 

General  Supplies 


***  ** 


Kitchen  &  Dining  Room 

Salaries  &  Wages  ****  «* 

Supplies  ****  **       ****  ** 


Laundry 

Salaries  &  Wages 
Supplies 


Food 

Butter  ****  ** 

Cereal,  Rice,  Meals,  etc. 

Coffee,  Tea,  Cocoa  &  Chocolate  ****  ** 


Fish 

Flour 

Fruit 

Meat 

Milk 

Potatoes 

Poultry 

Sugar 

Vegetables 

Sundries 


Total  Department  Expense 


GENERAL  HOUSE  &  PROPERTY  EXPENSE 

Heat,  Light  &  Power  Plant 
Salaries  &  Wages 
Coal 

Electrical  Supplies 
Repairs  &  Renewals 
Oils,  Waste,  etc. 

Repairs  to  Buildings 
Salaries  &  Wages 
Supplies 

Care  of  Buildings  &  Grounds 
Salaries  &  Wages 
Supplies 

Gas 

Water 

Insurance 

Conveyances 

General  Expense 


***   ** 


Total  General  House  &  Property  Expenses 

Total  Operation  Expense  *»»*»«"* 


292      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 

BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  2 

COST  OF  OPERATION  OF  MEDICAL  WARDS 
FOR  THE  YEAR  ENDING 19. ... 

PEB 

AMOUNT      PATIENT 
DAY 


Food 

Kitchen  Expense 

House  Officers 

Nurses — Schedule  7 

Orderlies 

Housekeeping  Salaries  &  Wages 

Laundry 

Medical  Supplies 

General  Supplies 

Dry  Goods 

Gas 

Water 

Pathological  Department 

Apothecary 

Care  of  Buildings 

Heating  &  Ventilating 

Electric  Lighting 

Insurance 

Repairs  to  Buildings 

Administration 

General  Expense 


*****  ** 


BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  3 

COST  OF  OPERATION  OF  SURGICAL  WARDS 
FOR  THE  YEAR  ENDING. .  . .  19. . 


AMOUNT 


PER 

PATIENT 
DAT 


Food 

Kitchen  Expense 

House  Officers 

Nurses — Schedule  7 

Orderlies 

Housekeeping — Salaries  &  Wages 

Laundry 

Medical  Supplies 

Surgical  Supplies 

General  Supplies 

Dry  Goods 

Gas 

Water 

Pathological  Department 


ANNUAL  REPORTS 


293 


AMOUNT 


PER 

PATIENT 
DAY 


Apothecary 

Care  of  Buildings 

Heating  &  Ventilating 

Electric  Lighting 

Insurance 

Repairs  to  Buildings 

Administration 

General  Expense 


*****  **       *   *** 


BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  4 

COST  OF  OPERATION  OF  MATERNITY  WARDS 
FOR  THE  YEAR  ENDING 19 .... 

AMOUNT 


PER 

PATIENT 
DAY 


Food 

Kitchen  Expense 

House  Officers 

Nurses — Schedule  7 

Housekeeping — Salaries  &  Wages 

Laundry 

Medical   Supplies 

Surgical  Supplies 

General   Supplies 

Dry  Goods 

Gas 

Water 

Pathological  Department 

Apothecary 

Care  of  Buildings 

Heating  &  Ventilating 

Electric  Lighting 

Insurance 

Repairs  to  Buildings 

Administration 

General  Expense 


** 
** 
** 

*» 
«* 

*  * 


** 
*» 
** 
** 

»» 

«* 

** 

** 

*** 

»* 


*****   ** 


BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  5 

COST  OF  OPERATION  OF  PRIVATE  PATIENT  WARDS 
FOR  THE  YEAR  ENDING 19. ... 


Food 

Kitchen  Expense 


AMOUNT 


****  ** 
»*«*  ** 


PER 

PATIENT 
DAY 


*** 
*** 


294      SYSTEM  BUILDING  AND  CONSTRUCTIVE  ACCOUNTING 


PER 
AMOUNT      PATIENT 


House  Officers 

Nurses — Schedule  7 

Orderlies 

Housekeeping — Salaries  &  Wages 

Laundry 

Medical  Supplies 

Surgical  Supplies 

General  Supplies 

Dry  Goods 

Gas 

Water 

Pathological  Department 

Apothecary 

Care  of  Buildings 

Heating  and  Ventilating 

Electric  Lighting 

Insurance 

Repairs  to  Buildings 

Administration 

General  Expense 


DAY 


***  ** 

****  »* 

«**  «« 

**  «* 
****  ** 
*»*  ** 
*** 
«** 
*** 

** 

** 
#** 
*** 
*** 
** 
** 
** 
** 
*** 
** 

*****  ** 


BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  6 

COST  OF  OPERATION  OF  OUTPATIENT  DEPARTMENT 
FOR  THE  YEAR  ENDING . .  . .  19 . . 


Officers  &  Assistants 

House  Officers 

Nurses — Schedule  V 

Laundry 

Medical   Supplies 

Surgical  Supplies 

General  Supplies 

Dry  Goods 

Gas 

Water 

Care  of  Buildings 

Heating  &  Ventilating 

Electric  Lighting 

Insurance 

Repairs  to  Buildings 

Administration 

General  Expense 

Food 

Kitchen  &  Dining  Room  Expense 

House  Salaries  &  Wages 


AMOUNT 


****  ** 

***  ** 
****  ** 

*»*  ** 

***  ** 

*** 

*** 
*» 
** 
** 

*** 
**** 

*** 

*** 

»** 

***  ** 


PEE 

TBEAT- 

MENT 


*»  ** 
**  ** 


*****  *» 


ANNUAL  REPORTS  295 

BAY  STATE  HOSPITAL 
EXHIBIT  D— SCHEDULE  7 

COST  OF  NURSES 
FOR  THE  YEAR  ENDING 19 

PER 

AMOUNT        NUBSE 
DAY 


Salaries  &  Wages 

Supt.  of  Nurses  &  Assistants 

Instructors 

Nurses 

Food  for  above 
Kitchen  Expense 

Laundry  ****  ** 

Dry  Goods  ***  ** 

Gas  **  ** 

General  Supplies  ***  ** 

Water 

Care  of  Buildings  ****  ** 

Heating  &  Ventilating  ****  ** 

Electric  Lighting 

Repairs  to  Buildings  ***  ** 

Insurance  ***  ** 

Administration  ««»»  »» 

General  Expense  ***  ** 


****»  »*  *  »»* 


DISTRIBUTION 


Medical  Wards 
Surgical   Wards 
Maternity  Wards 
Private  Wards 
Outpatient  Department 


** 


Nurse  Days 


**       a         it  ****  *» 

**       <(         «  »*•»»  *• 


***** 


Nurse  Days 


INDEX 


Accounting  department,  preliminary 

investigation  of,  8 
institutional,  240 
Accounts,      The     Central     Grocery 

Company,  125 
chart  of,  The  Central    Grocery 

Company,  126 
ledger,    Packford  Auto  Sales 

Company,  84 

commercial  expense,  The  Cen- 
tral Grocery  Company,  140 
cost,  Packford  Auto  Sales  Com- 
pany, 99 
expense,    The    Boylston    Club, 

206 
garage  expense,  Packford  Auto 

Sales  Company,  100 
general  administrative,  Packford 

Auto  Sales  Company,  99 
ledger,        Central        Leather 

Company,  236 

income,  The  Boylston  Club,  204 
The    Central    Grocery    Com- 
pany, 138 

Packford    Auto    Sales    Com- 
pany 97 
list     of     general     ledger,     The 

Boylston  Club,  183 
ledger,  Central  Leather  Com- 
pany, 226 
ledger,    Packford    Auto    Sales 

Company,  83 
operating,  Bay  State  Hospital, 

261 

receivable,  summary  of  postings 
to,    The    Central    Grocery 
Company,  114 
selling  expense,  Packford  Auto 

Sales  Company,  99 
superintendent's  ledger,  list  of, 
Bay  State  Hospital,  255 


Accounts,  treasurer's  ledger,  list  of, 

Bay  State  Hospital,  250 
Adjusting  and  closing  entries,  Bay 

State  Hospital,  273 
entries,  monthly,  The  Boylston 

Club,  222 

Administration,  preliminary  investi- 
gation of,  9 

Advice,  voucher  remittance,  Pack- 
ford  Auto  Sales  Company, 
35 

Allowances  and  returns,  sales,  Pack- 
ford  Auto  Sales  Company, 
54 
Analysis  of  departmental  expenses, 

The  Boylston  Club,  157 
of    expenses,     Packford     Auto 

Sales  Company,  83 
of  fixed  assets,  Packford  Auto 

Sales  Company,  68 
Annual  reports,  Bay  State  Hospital, 

284 

Assets,  The  Central  Grocery  Com- 
pany, 130 
analysis  of  fixed,  Packford  Auto 

Sales  Company,  68 
and    liabilities,    The    Boylston 

Club,  189 
preparation  of  statement  of, 

The  Boylston  Club,  201 
statement    of,    The    Central 

Grocery  Company,  120 
superintendent's  ledger,  Bay 

State  Hospital,  258 
Packford  Auto  Sales  Company, 

88 

Audited  invoices,  record  of,  The 
Central  Grocery  Company, 
109 

B 


Balance   sheet,    monthly,    Packford 
Auto  Sales  Company,  77 


297 


298 


INDEX 


Bank  check,   Packford  Auto  Sales 

Company,  42 
Bar  sales  ticket,  The  Boylston  Club, 

165 

Barber  shop  sales  ticket,  The  Boyls- 
ton Club,  167 
Bay  State  Hospital,  adjusting  and 

closing  entries,  273 
annual  reports,  284 
daily  cash  statement,  244 
general   information   patient 

card,  246 
plan,  242 

head  nurse's  daily  report,  247 
journal  entries,  267 
list  of  forms,  superintendent's 

office,  249 

operating  accounts,  261 
patient's  charge  card,  245 
preparing  reports,  281 
statements,  259 
storeroom  requisition,  246 
superintendent's  ledger,   assets 

and  liabilities,  258 
list  of  accounts,  255 
treasurer's   ledger,    list   of   ac- 
counts, 250 
x-ray  charge  card,  245 
Bill,   garage,   Packford   Auto  Sales 

Company,  60 

members'  monthly,  The  Boyls- 
ton Club,  175 
monthly  repair,  Packford  Auto 

Sales  Company,  56 
Billiards  and  pool  sales  ticket,  The 

Boylston  Club,  167 
Binders,  The  Central  Grocery  Com- 
pany, 129 
Bond  papers,  18 
Bowling  sales  ticket,  The  Boylston 

Club,  167 

Boylston  Club,  The,  analysis  of  de- 
partmental expenses,- 157 
assets  and  liabilities,  189 
cash  received,  159 
chart  of  organization,  149 
check  register,  160 
currency  voucher,  160 
directory  of  employees,  179 


Boylston   Club,  directory  of  mem- 
bers, 181 

expense  accounts,  206 
forms,  150 
general  discussion,  148 

statements,  221 
goods  received  slip,  152 
housekeeper's  daily  report,  170 
income  accounts,  204 
insurance  register,  180 
inventory  card,  180 
journal,  176 
list  of  forms,  187 

general    ledger    accounts, 

183 

members'  daily  charges,  172 
expiration  index,  180 
ledger,  173 
monthly  bill,  175 
membership  ticket,  180 
monthly  adjusting  entries,  222 
income    and    expense    state- 
ments, 209 

newspapers  and  periodicals  re- 
ceived and  returned,  182 
payroll  book,  176 
purchase  order,  150 
record  of  daily  business,  170 
restaurant  check  sheet,  169 
room  index  card,  169 

register,  169 
sales  records,  162 
tickets,  bar,  165 
barber  shop,  167 
billiards  and  pool,  167 
bowling,  167 
cigars,  166 
employee's  table,  165 
grill  room,  165 
newspapers  and  period- 
icals, 169 
restaurant,  163 
rooms,  167 

statement  of  assets  and  liabili- 
ties, preparation  of,  201 
stores  requisition,  151 
trial  balance  book  for  members' 

ledger,  173 
voucher  check,  160 


INDEX 


299 


Boylston  Club,  voucher  index  card, 

157 

jacket,  154 
register,  155 

Business,  record  of  daily,  The  Boyls- 
ton Club,  170 


C 


Car  register,   Packford  Auto  Sales 

Company,  61 
Carbon  paper,  22 
Card,    direct    labor    time,    Central 

Leather  Company,  233 
garage  directory,  Packford  Auto 

Sales  Company,  63 
index     for     garage     directory, 
Packford  Auto  Sales  Com- 
pany, 63 
inventory,  The  Boylston  Club, 

180 

Packford    Auto    Sales    Com- 
pany, 67 
patient's    charge,     Bay    State 

Hospital,  245 
general   information,    Bay 

State  Hospital,  246 
room  index,  The  Boylston  Club, 

169 

time,  Packford  Auto  Sales  Com- 
pany, 64 
voucher  index,  Packford  Auto 

Sales  Company,  38 
x-ray  charge,   Bay  State  Hos- 
pital, 245 
Cash  received, 

book,    Packford   Auto    Sales 

Company,  39 
The  Boylston  Club,  159 
record  of,  The  Central  Gro- 
cery Company,  112 
report,    daily,    Packford    Auto 

Sales  Company,  44 
statement,     daily,     Bay    State 

Hospital,  244 
Central    Grocery    Company,    The, 

accounts,  125 
assets,  130 
binders,  120 


Central  Grocery  Company,  chart  of 

accounts,  126 
closing  entries,  144 
commercial  expense  accounts, 

140 
daily  report  of  sales  and  profits, 

124 

income  accounts,  138 
journal,  118 
liabilities,  135 
list  of  forms,  109 
personnel  and  method  of  opera- 
tion, 107 

private  ledger,  119 
record  of  audited  invoices,  109 
of  cash  received,  112 
of  checks  drawn,  112 
sales  ledger  collections,  109 
salesman's  order,  124 
statement  of  assets  and  liabili- 
ties, 120 
of    revenues    and    expenses, 

121 

summary    of    postings    to    ac- 
counts receivable,  114 
sundry  gains,  141 

losses,  143 

tab  division  leaves,  129 
Central    Leather    Company,    daily 

cutting  report,  234 
direct  labor  time  card,  233 
general  and  manufacturing  ex- 
penses, 239 
discussion,  225 
ledger  accounts,  236 
goods  received  sheet,  229 
list  of  forms,  229 

ledger  accounts,  226 
sales  and  cost  journal,  230 
stock  requisition,  233 
voucher  register,  229 
Charge  card,   patient's,   Bay  State 

Hospital,  245 
x-ray,    Bay    State    Hospital, 

245 

Charges,  members'  daily,  The  Boyls- 
ton Club,  172 

Chart    of    accounts,    The    Central 
Grocery  Company,  126 


300 


INDEX 


Chart  of  accounts,  Packford  Auto 

Sales  Company,  84 
of  organization,   The  Boylston 

Club,  149 
Check,  bank,  Packford  Auto  Sales 

Company,  42 
register,    The    Boylston    Club, 

160 

Packford   Auto    Sales   Com- 
pany, 42 
sheet,  restaurant,  The  Boylston 

Club,  169 
voucher,    The    Boylston    Club, 

160 

Checks  drawn,  record  of,  The  Cen- 
tral Grocery  Company,  112 
Cigars  sales  tickets,  The  Boylston 

Club,  166 

Classification,   departmental  manu- 
facturing, 2 
wholesale,  1 
Closing  and  adjusting  entries,  Bay 

State  Hospital,  273 
entries,    The   Central    Grocery 

Company,  144 
Collections,  sales  ledger,  The  Central 

Grocery  Company,  109 
Color  of  paper,  21 

Commercial  expense  accounts,  The 
Central  Grocery  Company, 
140 

paper,  14 
Cost  accounts,  Packford  Auto  Sales 

Company,  99 
and      sales      journal,     Central 

Leather  Company,  230 
Packford  Auto  Sales  Com- 
pany, 50 
Cover  stock,  19 

Credit  department,  preliminary  in- 
vestigation of,  8 
Currency    voucher,    The    Boylston 

Club,  160 

Packford    Auto    Sales   Com- 
pany, 41 
Customers    ledger,    Packford   Auto 

Sales  Company,  74 
Cutting      report,      daily,     Central 
Leather  Company,  234 


D 

Daily  business,  record  of,  The  Boyls- 
ton Club,  170 
cash    report,     Packford    Auto 

Sales  Company,  44 
statement,    Bay   State   Hos- 
pital, 244 

charges,  members',  The  Boyls- 
ton Club,  172 
cutting  report,  Central  Leather 

Company,  234 
report,  head  nurse's,  Bay  State 

Hospital,  247 
housekeeper's,  The  Boylston 

Club,  170 

of  sales  and  profits,  The  Cen- 
tral Grocery  Company,  124 
Departmental    classification    manu- 
facturing, 2 
wholesale,  1 
expenses,    analysis  of,    The 

Boylston  Club,  157 
Designing,  problems  in,  3 

steps  in,  3 
Direct    labor    time    card,    Central 

Leather  Company,  233 
Directory    card,    garage,    Packford 

Auto  Sales  Company,  63 
index   for    garage,    Packford 

Auto  Sales  Company,  63 
of    employees,    The    Boylston 

Club,  179 
of     members,     The     Boylston 

Club,  181 
Discussion,  general,  Central  Leather 

Company,  225 

Division   leaves,   tab,   The  Central 
Grocery  Company,  129 

E 

Employees,  directory  of,  The  Boyls- 
ton Club,  179 
table  sales  tickets,  The  Boylston 

Club,  165 
Entries,  adjusting  and  closing,  Bay 

State  Hospital,  273 
closing,    The   Central   Grocery 
Company,  144 


INDEX 


301 


Entries,  journal,  Bay  State  Hospital, 

267 
monthly  adjusting,  The  Boy  1s- 

ton  Club,  222 
Expense    accounts,    The    Boylston 

Club,  206 
commercial,   The   Central 

Grocery  Company,  140 
garage,  Packford  Auto  Sales 

Company,  100 
selling,  Packford  Auto  Sales 

Company,  99 

statements,     monthly     income 
and,   The   Boylston   Club, 
209 
voucher,     traveling,     Packford 

Auto  Sales  Company,  41 
Expenses,  analysis  of,  Packford  Auto 

Sales  Company,  83 
of  departmental,  The  Boyls- 
ton Club,  157 

general  and  manufacturing, 
Central  Leather  Company, 
239 

statement  of  revenues  and,  The 
Central  Grocery  Company, 
121 

Expiration    index,    members,     The 
Boylston  Club,  180 


Forms  and  equipment,  4 
The  Boylston  Club,  150 
list  of,  The  Boylston  Club,  187 
The   Central   Grocery   Com- 
pany, 109 
Central    Leather    Company, 

229 

Packford    Auto    Sales    Com- 
pany, 30 

superintendent's   office,    Bay 
State  Hospital,  249 

G 

Gains,  sundry,  The  Central  Grocery 

Company,  141 
Garage   bill,    Packford   Auto   Sales 

Company,  60 


Garage     directory    card,    Packford 

Auto  Sales  Company,  63 

index,  Packford  Auto  Sales 

Company,  63 

expense   accounts,   Packford 
Auto  Sales  Company,  100 
register,    Packford   Auto   Sales 

Company,  64 
service    sheet,    Packford    Auto 

Sales  Company,  58 
slips,    Packford    Auto    Sales 

Company,  57 

General  administrative  accounts, 
Packford  Auto  Sales  Com- 
pany, 99 

and    manufacturing    expenses, 
Central  Leather  Company, 
239 
discussion,  1 

The  Boylston  Club,  148 
Central    Leather    Company, 

225 
information  patient  card,   Bay 

State  Hospital,  246 
journal,    Packford   Auto   Sales 

Company,  76 
ledger,     Packford    Auto    Sales 

Company,  74 

accounts,  list  of,  The  Boyls- 
ton Club,  183 
Central  Leather  Company, 

236 

plan,  Bay  State  Hospital,  242 
preliminary  investigation,  6 
statements,  The  Boylston  Club, 

221 
system  and  plan,  Packford  Auto 

Sales  Company,  28 
Goods      received      sheet,      Central 

Leather  Company,  229 
slip,  The  Boylston  Club,  152 
Grill  room  sales  tickets,  The  Boyls- 
ton Club,  165 

H 

Head  nurse's  daily  report,  Bay  State 

Hospital,  247 
Housekeeper's    daily    report,     The 

Boylston  Club,  170 


302 


INDEX 


Income    accounts,     The     Boylston 

Club,  204 

Packford   Auto    Sales   Com- 
pany, 97 

The   Central   Grocery   Com- 
pany, 138 

and   expense   statements, 
monthly,   The   Boylston 
Club,  209 
Index    card,    room,    The    Boylston 

Club,  169 
voucher,  The  Boylston  Club, 

157 

Packford  Auto  Sales  Com- 
pany, 38 

for  garage  directory  card,  Pack- 
ford  Auto  Sales  Company, 

63 

members  expiration,  The  Boyls- 
ton Club,  180 
stock,  20 
Information,  general,  patient  card, 

Bay  State  Hospital,  246 
Institutional  accounting,  240 
Insurance    register,    The    Boylston 

Club,  180 

Packford   Auto   Sales    Com- 
pany, 72 

Inventories,   preliminary   investiga- 
tion of,  8 
Inventory  card,  The  Boylston  Club, 

180 

Packford    Auto    Sales   Com- 
pany, 67 

Investigation    of    inventories,    pre- 
liminary, 8 
preliminary,  6 
report  of,  12 

Invoices,  record  of  audited,  The 
Central  Grocery  Company, 
109 


Journal,  The  Boylston  Club,  176 
The  Central  Grocery  Company, 

118 
entries,  Bay  State  Hospital,  267 


Journal,     general,     Packford    Auto 

Sales  Company,  76 
sales  and  cost,  Central  Leather 

Company,  230 
Packford  Auto  Sales  Com- 
pany, 50 


Labor    time    card,    direct,    Central 

Leather  Company,  233 
Ledger   accounts,    general,    Central 

Leather  Company,  236 
chart  of,  Packford  Auto  Sales 

Company,  84 

list  of,  Central  Leather  Com- 
pany, 226 
general,  The  Boylston  Club. 

183 

Packford  Auto  Sales  Com- 
pany, 83 
collections,  sales,   The  Central 

Grocery  Company,  109 
customers,  Packford  Auto  Sales 

Company,  74 
general,    Packford   Auto   Sales 

Company,  74 
members',  The  Boylston  Club, 

173 
private,   The  Central   Grocery 

Company,  119 
stock,  17 

superintendent's,  assets  and  lia- 
bilities, Bay  State  Hospital, 
258 
list  of  accounts,   Bay  State 

Hospital,  255 
treasurer's,     list    of    accounts, 

Bay  State  Hospital,  250 
trial  balance  book  for  members, 

The  Boylston  Club,  173 
Liabilities,     The    Central    Grocery 

Company,  135 
Packford  Auto  Sales  Company, 

94 
Liabilities  and  assets,  The  Boylston 

Club,  189 

preparation  of  statement  of, 
The  Boylston  club,  201 


INDEX 


303 


Liabilities  and  assets,  statement  of, 
The  Central  Grocery  Com- 
pany, 120 
superintendent's  ledger,  Bay 

State  Hospital,  258 
List   of   accounts,    superintendent's 
ledger,  Bay  State  Hospital, 
255 
treasurer's  ledger,  Bay  State 

Hospital,  250 

forms,   The  Boylston  Club,  187 
The   Central   Grocery   Com- 
pany, 109 
Central    Leather    Company, 

229 

Packford   Auto    Sales   Com- 
pany, 30 
superintendent's   office,    Bay 

State  Hospital,  249 
of  general  ledger  accounts,  The 

Boylston  Club,  183 
of     ledger     accounts,     Central 

Leather  Company,  226 
Losses,  sundry,  The  Central  Grocery 
Company,  143 

M 

Manila  tag  stock,  20 
Manufacturing   and   general   ex- 
penses,    Central     Leather 
Company,  239 

business,    classification   by   de- 
partments, 2 

Members'  daily  charges,  The  Boyls- 
ton Club,  172 
directory     of,     The     Boylston 

Club,  181 
expiration  index,  The  Boylston 

Club,  180 

ledger,  The  Boylston  Club,  173 
trial  balance  book  for,   The 

Boylston  Club,  173 
monthly    bill,     The    Boylston 

Club,  175 
Membership   ticket,   The   Boylston 

Club,  180 

Method  of  operation  and  personnel, 
The  Central  Grocery  Com- 
pany, 107 


Method  of  procedure,  5 

Monthly     adjusting     entries,     The 

Boylston  Club,  222 
balance  sheet,   Packford  Auto 

Sales  Company,  77 
bill,   members',    The   Boylston 

Club,  175 
incomei  and  expense  statements, 

The  Boylston  Club,  209 
repair  bill,  Packford  Auto  Sales 

Company,  56 
statements,    Packford   Auto 

Sales  Company,  77 

N 

New  concern,  system  for,  2 
Newspapers  and  periodicals  received 
and  returned,   The  Boyls- 
ton Club,  182 
sales   tickets,    The   Boylston 

Club,  169 

Nurse's,  head,  daily  report,  Bay 
State  Hospital,  247 

O 

Office  copy,  voucher,  Packford  Auto 
Sales  Company,  35 

Onion  skin  paper,  19 

Operating  accounts,  Bay  State  Hos- 
pital, 261 

Operation,  method  of,  and  personnel, 
The  Central  Grocery  Com- 
pany, 107 

Order,  purchase,  The  Boylston  Club, 

150 

Packford   Auto    Sales   Com- 
pany, 32 

salesman's,    The   Central   Gro- 
cery Company,  124 

Organization,  chart  of,  The  Boylston 
Club,  149 


Packford     Auto     Sales     Company, 

analysis  of  expenses,  83 
analysis  of  fixed  assets,  68 
assets,  88 
bank  check,  42 


304 


INDEX 


Packford    Auto    Sales     Company, 

car  register,  61 
cash  received  book,  39 
chart  of  ledger  accounts,  84 
check  register,  42 
cost  accounts,  99 
currency  voucher,  41 
customer's  ledger,  74 
daily  cash  report,  44 
garage  bill,  60 

directory  card,  63 

expense  accounts,  100 

register,  64 

service  sheet,  58 

slips,  57 

general  administrative  accounts, 
99 

journal,  76 

ledger,  74 

system  and  plan,  28 
income  accounts,  97 
index  for  garage  directory  card, 

63 

insurance  register,  72 
inventory  card,  67 
liabilities,  94 
list  of  forms,  30 

of  ledger  accounts,  83 
monthly  balance  sheet,  77 

repair  bill,  56 

statements,  77 
payroll,  65 
purchase  order,  32 

requisition,  32 
repair  tags,  47 
reserves,  95 
sales  and  cost  journal,  50 

returns  and  allowances,  54 

tickets,  46 

selling  expense  accounts,  99 
stock  requisition,  47 
supplementary  repair  tags,  50 
time  cards,  64 

traveling  expense  voucher,  41 
voucher  index  card,  38 

office  copy,  35 

register,  35 

remittance  advice,  35 
Paper  and  paper  making,  14 


Paper,  carbon,  22 
color  of,  21 
onion  skin,  19 
selection  of,  15 
size  of,  16 
thickness  of,  22 
weight  of,  16 
Papers,  bond,  18 
commercial,  14 
ledger,  17  . 

Patient  card,   general  information, 

Bay  State  Hospital,  246 
Patient's   charge   card,    Bay   State 

Hospital,  245 

Payroll,  Packford  Auto  Sales  Com- 
pany, 65 

book,  The  Boylston  Club,  176 
preliminary  investigation  of,  9 
Periodicals    and    newspapers,    The 

Boylston  Club,  169 
received   and  returned,   The 

Boylston  Club,  182 
Personnel  and  method  of  operation, 
The  Central  Grocery  Com- 
pany, 107 

of  the  organization,  4 
Plan  and  system,  General,  Packford 

Auto  Sales  Company,  28 
general,  Bay  State  Hospital,  242 
idea  or  purpose,  4 
Pool  and  billiards  sales  ticket,  The 

Boylston  Club,  167 
Postings    to    accounts    receivable, 
summary  of,  The  Central 
Grocery  Company,  114 
Preliminary  investigation,  account- 
ing department,  8 
administration,  9 
credit  department,  8 
general,  6 
inventories,  8 
payroll,  9 
purchases,  6 

receiving  and  stock  keeping,  7 
sales,  8 

study  of,  10 

Preparation  of  statement  of  assets 
and  liabilities,  The  Boyls- 
ton Club,  201 


INDEX 


305 


Preparing  reports,  Bay  State  Hos- 
pital, 281 

Principals  in  actuating  systems,  3    • 

Printing  and  ruling,  24 

Private  ledger,  The  Central  Grocery 
Company,  119 

Problems  in  designing,  3 

Profits  and  sales,  daily  report  of,  The 
Central  Grocery  Company, 
124 

Purchase  order,  The  Boylston  Club, 

150 

Packford    Auto    Sales    Com- 
pany, 32 

requisition,  Packford  Auto  Sales 
Company,  32 

Purchases,  preliminary  investigation 
of,  6 

R 

Received  and  returned  newspapers 
and  periodicals,  The  Boyls- 
ton Club,  182 

Receiving  and  stock  keeping,   pre- 
liminary investigation  of,  7 
Record  of  audited  invoices,  The  Cen- 
tral Grocery  Company,  109 
of  cash  received,   The  Central 

Grocery  Company,  112 
of  checks  drawn,  The  Central 

Grocery  Company,  112 
of  daily  business,  The  Boylston 

Club,  170 
Register,  car,  Packford  Auto  Sales 

Company,  61 

check,  The  Boylston  Club,  166 
Packford    Auto    Sales    Com- 
pany, 42 
garage,    Packford    Auto    Sales 

Company,  64 
insurance,  The  Boylston  Club, 

180 

Packford    Auto    Sales    Com- 
pany, 72 

room,  The  Boylston  Club,  169 
voucher,    The   Boylston    Club, 

155 

Central    Leather    Company, 
229 

20 


Register,  Packford  Auto  Sales  Com- 
pany, 35 

Remittance  advice,  voucher,  Pack- 
ford  Auto  Sales  Company, 
35 
Repair  bill,  monthly,  Packford  Auto 

Sales  Company,  56 
tag,  Packford  Auto  Sales  Com- 
pany, 47 
supplementary,    Packford 

Auto  Sales  Company,  50 
Report,  daily  cash,  Packford  Auto 

Sales  Company,  44 
cutting,    Central  Leather 

Company,  234 
sales  and  profits,  The  Central 

Grocery  Company,  124 
head  nurse's  daily,   Bay  State 

Hospital,  247 

housekeeper's  daily,  The  Boyls- 
ton Club,  170 

Reports,  preparing,  Bay  State  Hos- 
pital, 281 

annual,  Bay  State  Hospital,  284 
on  investigation,  12 
Requisition,    Purchase,    Packford 

Auto  Sales  Company,  32 
stock,    Central    Leather    Com- 
pany, 233 

Packford    Auto   Sales    Com- 
pany, 47 

stores,  The  Boylston  Club,  151 
storeroom,  Bay  State  Hospital, 

246 

Reserves,  Packford  Auto  Sales  Com- 
pany, 95 

Restaurant  check  sheet,  The  Boyls- 
ton Club,  169 
sales     tickets,     The     Boylston 

Club,  163 

Returns  and  allowances,  sales,  Pack- 
ford  Auto  Sales  Company, 
54 

Results,  record  of,  5 
Returned  newspapers  and  periodi- 
cals, The  Boylston  Club,  182 
Revenues  and  expenses,  statement 
of,    The    Central    Grocery 
Company,  121 


306 


INDEX 


Room    index    card,    The    Boylston 

Club,  169 
register,    The    Boylston    Club, 

169 
sales     tickets,     The     Boylston 

Club,  167 

Routine,  details  of,  5 
Ruling  and  printing,  24 


S 


Sales    and    cost    journal,    Central 
Leather    Company,   230 
Packford  Auto  Sales  Com- 
pany, 50 

and  profits,  daily  report  of,  The 
Central  Grocery  Company, 
124 
ledger  collections,  The  Central 

Grocery  Company,  109 
preliminary  investigation  of,  8 
records,  The  Boylston  Club,  162 
returns  and  allowances,   Pack- 
ford  Auto  Sales  Company, 
54 
tickets,  The  Boylston  Club,  bar, 

165 

barber  shop,  167 
billiards  and  pool,  167 
bowling,  167 
cigars,  166 

employee's  table,  165 
grill  room,  165 
newspapers   and   periodicals, 

169 

restaurant,  163 
rooms,  167 

Packford  Auto   Sales    Com- 
pany, 46 

Salesman's  order,  The  Central  Groc- 
ery Company,  124 
Selection  of  paper,  15 
Selling  expense  accounts,  Packford 

Auto  Sales  Company,  99 
Service  sheet,  garage,  Packford  Auto 

Sales  Company,  58 
slips,    garage,    Packford    Auto 

Sales  Company,  57 
Size  of  paper,  16 


Statement  of  assets  and  liabilities, 
The   Central   Grocery 
Company,  120 
preparation    of,    The  Boylston 

Club,  201 
daily  cash,  Bay  State  Hospital, 

244 

of  revenues  and  expenses,  The 
Central  Grocery  Company, 
121 

Statements,  Bay  State  Hospital,  259 
General,  The  Boylston  Club,  221 
monthly,  Packford  Auto  Sales 

Company,  77 
income    and    expense,     The 

Boylston  Club,  209 
Steps  in  designing,  3 
Stock  keeping  and  receiving,  prelimi- 
nary investigation  of,  7 
requisition,    Central   Leather 

Company,  233 

Packford    Auto   Sales    Com- 
pany, 47 
Stores    requisition,    The    Boylston 

Club,  151 
Storeroom    requisition,    Bay    State 

Hospital,  246 

Study  of  preliminary  investigation,  10 

Summary   of  postings  to   accounts 

receivable,    The   Central 

Grocery  Company,  114 

Sundry  gains,  The  Central  Grocery 

Company,  141 
losses,    The    Central    Grocery 

Company,  143 

Superintendent's  ledger,  assets  and 
liabilities,  Bay  State  Hos- 
pital, 258 
list  of  accounts,   Bay  State 

Hospital,  255 
office,  list  of  form,  Bay  State 

Hospital,  249 
Supplementary  repair  tags,  Packford 

Auto  Sales  Company,  50 
System  and  plan,  general,  Packford 

Auto  Sales  Company,  28 
building,  general  discussion,  1 
for  new  concern,  2 
Systems,  principals  in  actuating,  3 


INDEX 


307 


Tab  division  leaves,  The  Central 
Grocery  Company,  129 

Tag  stock,  manilla,  20 

Tags,  repair,   Packford  Auto  Sales 

Company,  47 

supplementary  repair,  Packford 
Auto  Sales  Company,  50 

Tickets,  membership,  The  Boylston 

Club,  180 

sales,  Packford  Auto  Sales  Com- 
pany, 46 

Time    card,    direct    labor,    Central 

Leather  Company,  233 
Packford   Auto   Sales   Com- 
pany, 64 

Traveling  expense  voucher,  Pack- 
ford  Auto  Sales  Company, 
41 

Treasurer's  ledger,  list  of  accounts, 
Bay  State  Hospital,  250 

Trial  balance  book  of  members' 
ledger,  The  Boylston  Club, 
173 


Voucher  check,  The  Boylston  Club, 

160 

currency,   The  Boylston  Club, 
160 


Voucher    currency,   Packford   Auto 

Sales  Company,  41 
index  card,  The  Boylston  Club, 

157 

Packford  Auto  Sales  Com- 
pany, 38 

jacket,  The  Boylston  Club,  154 
office  copy,  Packford  Auto  Sales 

Company,  35 
register,    The    Boylston    Club, 

155 
Central    Leather    Company, 

229 

Packford    Auto    Sales    Com- 
pany, 35 
remittance     advice,     Packford 

Auto  Sales  Company,  35 
traveling   expense,    Packford 
Auto  Sales  Company,  41 

W 

Weight  of  paper,  16 
Wholesale  business,  classification  by 
departments,  1 


X 


x-ray  charge  card,  Bay  State  Hos- 
pital, 245 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 
This  book  is  DUE  on  the  last  date  stamped  below. 


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Form  L9-32m-8,'58(5876s4)444 


Library 
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